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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: Patricia Trinchero who wrote (121294)	1/8/2001 1:58:19 PM
From: peter a. pedroli	Read Replies (1) \| Respond to of 769667

this is clinton's recession and it will be BUSH'S TAX CUT! Monday January 8, 1:20 pm Eastern Time Wall Street Firm Sees Recession in 2001 By Ross Finley NEW YORK (Reuters) - The sputtering U.S. economy will sink into recession in the first half of 2001, snapping its longest expansion in history, Wall Street investment bank Morgan Stanley Dean Witter forecast on Monday. In the first prediction of an imminent recession by a major Wall Street firm, chief economist Stephen Roach said U.S. gross domestic product (GDP) would shrink by an annual rate of 1.25 percent in the first half of 2001. ``The cumulative forces of contraction are both accelerating and deepening in the U.S.,'' Roach told Reuters. Last Wednesday, the Federal Reserve took markets by surprise and slashed key interest rates by half a percentage point in rare-intermeeting action. Economists said that showed the Fed saw the risks of recession rising. But until recently, most of the big brokerages had only seen less than a one-in-three chance of recession this year. Morgan Stanley, one of the 26 primary dealers of U.S. government securities, now expects 1.1 percent GDP growth for the entire year, down sharply from a previous forecast of 2.5 percent. That 1.1 percent growth was contingent upon an expected rebound in the second half of the year. Global economic growth would also likely suffer from the U.S. slump, said Roach, who also slashed his forecast for global output to 2.9 percent from 3.5 percent. That was Morgan Stanley's largest ever one-time cutback in global growth expectations. Roach added that he saw a 45 percent probability of a U.S.-sparked global recession in 2001. FIRST CONTRACTION IN DECADE Eroding consumer confidence, weakness in the manufacturing sector, high natural gas prices and a sharp decline in equity prices were likely to cause the first contraction in the world's largest economy in a decade, Roach said. U.S. measures of consumer confidence have tumbled recently to their lowest levels since the global financial crisis in late 1998 when Russia defaulted on its debt. The manufacturing sector has seen five consecutive months of contraction. Government data last week showed the most first-time unemployment claims filings in 2-1/2 years. Meanwhile, the technology-weighted Nasdaq index has plummeted more than 50 percent since hitting its all-time high in March 2000, further dampening consumer spirits. ``All of that together to me is a classic sign of a U.S. economy that has now moved into recession,'' Roach said. A recession is generally defined as two successive quarters of economic contraction. The government's latest reading on GDP growth showed a dramatic slowdown to a 2.2 percent annual pace in the third quarter of 2000 from 5.6 percent in the second. Roach said that the Fed, which tightened its monetary spigots six times between June 1999 and May 2000, may have gone too far in trying to slow what it saw as an unsustainable rate of growth that threatened to ignite inflation. ``Those impacts are still there and the Fed has only begun the process of unwinding that,'' Roach said. The Fed's shock rate cuts last week were a ``down payment'' toward further decreases in borrowing costs not far down the road, Roach predicted. The central bank cut its benchmark overnight bank lending rate to 6.0 percent from 6.5 percent. ``They had to move from monetary restraint to easing and it's our view they've got a lot more to do on that front,'' he said. Separately, investment bank Goldman Sachs said on Friday it cut its GDP outlook from one of growth to contraction. They now expect GDP to shrink at a 0.3 percent yearly pace in the first three months of 2001, a substantial cutback from their previous forecast of 1.5 percent growth. Goldman said in a research note to clients that the Fed's rate cut last week signaled ``a greater sense of urgency about the risk of a recession.'' New York-based economic forecasters ISI Group said in a report also released on Monday they expected zero growth in the first two quarters of 2001, what they described as a ``mild recession.''