<U.S Economy> Steady as she goes say Goldman Sachs- I love you Abby.<vbg>
Sig: Looks good to me,remember we are going to have one hell of a year
and you heard it here first.
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Wednesday February 3, 10:52 am Eastern Time
Goldman sees US economy terrific, but slowing down
By Alden Bentley
NEW YORK, Feb 3 (Reuters) - Goldman, Sachs and Co. chief economist William Dudley said on Wednesday the U.S. economy is clearly ''terrific,'' but that an expected slowdown in consumer and business spending points to slower growth.
''Forecasts of a slowdown at this point are, at best, premature,'' Dudley told the Goldman Sachs annual foreign exchange conference.
Dudley said Goldman forecast the U.S. economy will grow by 2.7 percent in the first quarter, and 2.2 percent in the second quarter. The U.S. economy grew at a rapid 5.6 percent in the closing quarter of 1998, a year during which it expanded at 3.9 percent.
''We do not think the Federal Reserve is going to do anything during the first half of the year,'' said Dudley, who expected an easing in the second half of 1999.
The Federal Open Market Committee (FOMC) is expected to announce later on Wednesday the outcome of its two-day policy meeting. Wall Street analysts widely expect the FOMC to keep the 4.75-percent federal funds rate unchanged.
Dudley predicted bond yields will run in ''a little bit of trouble'' in the near term and edge up to a near-term high of about 5.50 percent and will retreat below 5.0 percent later this year as the U.S. economy shows signs of slowing down.
The Goldman chief economist expected rapid consumer spending, so far fueled by the stock market's wealth effect, to decelerate and be one of the culprits accounting for the slowdown in the first half of 1999. However, Dudley did not expect a collapse in consumer spending either.
''The consumer is still in very good shape,'' said Dudley, who predicted the personal savings rate, near zero at the moment, will edge up and, as a result, consumption which has been running ahead of income, will fall.
Dudley also described capital spending as clearly vulnerable to a slowdown, although he cautioned the levels of corporate expenditures related to solving the ''Millennium Bug'' problem were difficult to estimate.
The Goldman chief economist also noted that capacity usage rates have started to fall and are constraining profits.
Another problem down the road for the U.S. economy will come from international trade and the deterioration of the U.S. external account balance, especially if another major shock comes out of the currency crisis in Latin America.
''Mexico is the key,'' Dudley said of the risk of a full-blown crisis in Brazil that would extend to the entire region, although he expected Mexico to be able to weather the contagion effect.
Despite the sharp decline in global commodities prices, Dudley called talk of U.S. deflation ''spectacularly premature.''
Wednesday February 3, 10:52 am Eastern Time
Goldman sees US economy terrific, but slowing down
By Alden Bentley
NEW YORK, Feb 3 (Reuters) - Goldman, Sachs and Co. chief economist William Dudley said on Wednesday the U.S. economy is clearly ''terrific,'' but that an expected slowdown in consumer and business spending points to slower growth.
''Forecasts of a slowdown at this point are, at best, premature,'' Dudley told the Goldman Sachs annual foreign exchange conference.
Dudley said Goldman forecast the U.S. economy will grow by 2.7 percent in the first quarter, and 2.2 percent in the second quarter. The U.S. economy grew at a rapid 5.6 percent in the closing quarter of 1998, a year during which it expanded at 3.9 percent.
''We do not think the Federal Reserve is going to do anything during the first half of the year,'' said Dudley, who expected an easing in the second half of 1999.
The Federal Open Market Committee (FOMC) is expected to announce later on Wednesday the outcome of its two-day policy meeting. Wall Street analysts widely expect the FOMC to keep the 4.75-percent federal funds rate unchanged.
Dudley predicted bond yields will run in ''a little bit of trouble'' in the near term and edge up to a near-term high of about 5.50 percent and will retreat below 5.0 percent later this year as the U.S. economy shows signs of slowing down.
The Goldman chief economist expected rapid consumer spending, so far fueled by the stock market's wealth effect, to decelerate and be one of the culprits accounting for the slowdown in the first half of 1999. However, Dudley did not expect a collapse in consumer spending either.
''The consumer is still in very good shape,'' said Dudley, who predicted the personal savings rate, near zero at the moment, will edge up and, as a result, consumption which has been running ahead of income, will fall.
Dudley also described capital spending as clearly vulnerable to a slowdown, although he cautioned the levels of corporate expenditures related to solving the ''Millennium Bug'' problem were difficult to estimate.
The Goldman chief economist also noted that capacity usage rates have started to fall and are constraining profits.
Another problem down the road for the U.S. economy will come from international trade and the deterioration of the U.S. external account balance, especially if another major shock comes out of the currency crisis in Latin America.
''Mexico is the key,'' Dudley said of the risk of a full-blown crisis in Brazil that would extend to the entire region, although he expected Mexico to be able to weather the contagion effect.
Despite the sharp decline in global commodities prices, Dudley called talk of U.S. deflation ''spectacularly premature.''
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REF:NBD
Here is something interesting on Online brokers and their prospects.
cbs.marketwatch.com
cbs.marketwatch.com |
