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To: long-gone who wrote (87772)	7/11/2002 8:56:53 PM
From: Richnorth	Respond to of 116932

O'Neill sees no need to cut 3-3.5% US growth forecast Fundamentals remain sound, says the Treasury Secretary, but businesses and corporate leaders are less upbeat WASHINGTON - Corporate accounting scandals in the United States and falling stock prices have not changed the outlook for economic growth at a 3 to 3.5 per cent annual rate by the fourth quarter, Treasury Secretary Paul O'Neill said. But US businesses and corporate leaders have turned more cautious about the strength of the US economy's recovery, signalling that growth is likely to be sluggish for the rest of this year, two surveys showed. The Bush administration is scheduled to release an update of its Budget and economic forecasts on Monday, and Mr O'Neill suggested he sees no reason to change the February forecast. 'The fundamentals are sound, with inflation low and productivity booming,' he told the US Chamber of Commerce. 'Business profits are up. Real wages are growing and industrial production is increasing.' The US economy grew at a 6.1 per cent annual rate in the first quarter, the fastest in more than two years, after falling into recession in March last year. Second-quarter growth is expected to have slowed to 2.7 per cent, less than half the pace in the first quarter. The slowing economy and concern about corporate scandals sent stocks plunging on Wednesday. The Standard & Poor's 500 had its biggest one-day rout since the first day of trading following the Sept 11 attacks, falling to its lowest level since 1997. It is down 20 per cent from the start of the year. A poll of 113 companies by the National Association for Business Economics (Nabe) showed they slashed current capital spending for the fifth quarter in a row during the April-June period - a record streak of cuts in the 20-year history of the Nabe survey. Only 15 per cent of the firms planned to hire workers over the next 12 months. But none of the respondents expected the economy to contract again in the coming quarters. Instead, half of them forecast economic growth at a 2 to 3 per cent annual rate in the second half, down from 6.1 per cent in the first quarter. In a separate Conference Board survey, chief executives grew more pessimistic about the short-term outlook even as their assessment of current business conditions improved in the second quarter. The Conference Board's business confidence index, calculated through a quarterly survey of more than 100 business chiefs, fell to 61 in the April-June period from 66 in the first quarter. Even with conservatism ruling the day, nearly 70 per cent of the chief executives polled expected corporate profits to rise over the next 12 months. 'Executives continue to rate current economic conditions favourably, but they are more cautious looking ahead,' Ms Lynn Franco, director of the Conference Board's consumer research centre, said. -- Bloomberg News, Reuters