To: Brian K Crawford who wrote (104108 ) 2/23/1999 8:19:00 AM From: Mohan Marette Respond to of 176387
<U.S.Economy>Yeah nice try Hawkins,where the hell is Humphrey? Now here is the real deal. ======================= <B.Greenspan Likely to Signal Steady Monetary Policy in Testimony to Congress Washington, Feb. 23 (Bloomberg) -- Federal Reserve Chairman Alan Greenspan will probably tell Congress today that the U.S. economy is set to roll non-stop toward the longest-running expansion in the nation's history, analysts said. Greenspan's message isn't likely to differ from two weeks ago, when he dubbed the economy ''the envy of the world'' during an appearance before Congress. Stocks and bonds gained yesterday on expectations that the Fed chairman's testimony would signal no change in interest-rate policy for now. The economy has expanded at a greater than 3 percent pace in each of the past three years -- growing at a 6 percent or better annual rate in the final three months of 1998. Unemployment in January held at a 28-year low of 4.3 percent and inflation has stayed below 2 percent for each of the last two years. ''The U.S. economy continues to sizzle, far outperforming expectations,'' said Allen Sinai, chief global economist at Primark Decision Economic, Inc., in New York. The Senate Banking Committee will hear from Greenspan at 10 a.m. Washington time in the first installment of the Fed chairman's twice-yearly economic forecast to Congress. A subcommittee of the House Banking Committee will hear a reprise of Greenspan's testimony on Wednesday. The economy powered ahead for all last year at a 3.9 percent pace, matching 1997's growth rate, as consumer spending registered its strongest gain in 14 years. Manufacturing was the only victim of weak global economic conditions as exports dried up. Factories couldn't raise prices either for fear of suffering lost market share. Risk to Exports There's still a risk that weak global economies will take more of a bite out of U.S. export growth. And Greenspan will probably signal that the economy's growth rate will slow this year as exports stay weak, corporate profit growth cools and business investment slows, said analysts. Last year, that was the Fed's view. In July 1998, the Fed projected growth for 1999 would come in between 2 percent and 2.5 percent. The Fed said then that demand for U.S. exports will be sluggish as global economies struggle to boost economic growth. The Fed also said it expected housing activity and business investment in new plants and equipment to moderate this year. Still, the Fed chairman will probably say the risks to the U.S. economy ''are evenly balanced -- no harm, no foul,'' said Tim O'Neill, chief economist for Harris Bank and the Bank of Montreal in Toronto. Low inflation, low interest rates, high consumer confidence, strong income growth and a sturdy labor market will probably keep the economy on track. In April the current expansion -- already the longest in peacetime -- will begin it's ninth year. Productivity Gains There's little concern the economy will overheat because worker productivity is showing gains. As recently as Feb. 11, Greenspan stressed that productivity improvements are keeping inflation in check. He'll probably echo that theme today, analysts said. ''The economy is growing quite robustly by all appearances, but at the same time we have no evidence of either rising actual inflation or intensifying inflation expectations at this point,'' Federal Reserve Bank of Richmond President Alfred Broaddus told reporters Monday before a speech in Norfolk, Virginia. Confidence that tame inflation will keep the Fed from pushing up the overnight bank lending rate has also helped stocks. The Dow Jones Industrial Average rose 213 points, or 2.3 percent, yesterday to close at 9552.68 -- within 91 points of its record close on Jan. 8. ''We don't think it's likely Greenspan will increase rates in the face of slowing economies worldwide,'' said Frank James, president of James Investment Research Inc., which oversees $700 million. ''Rates on the 10- and 30-year bonds are likely to decline.'' Bond Yields Decline Yesterday, the yield on the 30-year Treasury bond fell 4 basis points to 5.35 percent. Lower bond yields tend to help stocks because they make it cheaper for companies to borrow money for expansion. Stocks ''are being helped as bond yields pull back with no inflation in the U.S.,'' said Stephen Dalton, who manages $1.7 billion in growth stocks for First Union Corp.'s First Capital Corp. The U.S. economy began this year with a big head of steam.Gross domestic product may have increased in excess of a 6 percent annual rate during the fourth quarter, according to economists. The government previously estimated that GDP grew at a 5.6 percent rate in the final three months of last year and will issue its first revision to that estimate on Friday. In December, the current period of economic growth that started in April 1991 became the longest peacetime expansion on record, passing the 92-month Reagan-era expansion. The only longer expansion, 106 months between 1961 and 1969, coincided with the buildup for the Vietnam War, according to the National Bureau of Economic Research Inc., which has collected data back to 1854. If the expansion survives another year, into February 2000, it will surpass that record. Greenspan presents the central bank's economic forecast to Congress twice a year, as mandated by the Humphrey-Hawkins Full Employment and Balanced Growth Act. bloomberg.com