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Greenspan Says 2.5% Growth Possible in Third Quarter (Update2)
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By Steve MatthewsAug. 2 (Bloomberg) -- The most severe recession in at least
five decades may be ending and growth may resume at a rate faster than most
economists foresee, former Federal Reserve Chairman Alan Greenspan said.“We may
very well have 2.5 percent in the current quarter,” Greenspan said in an
interview today on ABC’s “This Week” program. “The reason is there has been
such an extraordinarily high rate of inventory liquidation that the production
levels are well under consumption.”The U.S. economy contracted at a
better-than-forecast 1 percent annual pace in the second quarter, the Commerce
Department reported July 31. Stabilization of housing markets and consumer
spending, a lessening of financial turmoil and increased government spending
all suggest the longest recession since the 1930s may be close to ending.“I’m
short-term optimistic, but with many caveats,” the former Fed chairman said.
Housing markets have
“stabilized temporarily” though it is “possible” the economy might relapse if
there is a further slide in home prices of more than about 5 percent. If prices
dropped by 10 percent or more, “that would create a major acceleration in
foreclosures,” Greenspan said.
