Source : Straits Times - 16 Jun 2008
UNITED States financial markets, roiled by the collapse of the sub-prime mortgage market, have shown a ‘pronounced turnaround’ since March, says Mr Alan Greenspan, the former US Federal Reserve chairman.
The worst of the credit crisis is over, or will be soon, and there is now a ‘reduced possibility’ of a deep recession, he said in remarks via satellite to a conference in Mexico City last Friday.
Mr Greenspan’s comments contrast with his view in February that the odds of a recession were ‘50 per cent or better’ and that the slump could be deeper than the previous two contractions.
The former Fed chief said that tax rebates to US consumers are bringing about increased sales. ‘There is a sense it is buoying the retail market,’ he said, adding that the US economy has shown a ‘remarkable resilience’.
A government report this month showed that US retail sales in May rose 1 per cent, twice as much as economists had forecast, as consumers spent rebates provided under a government economic stimulus plan.
Mr Greenspan said housing remains a ‘critical problem’ and financial markets may not recover fully until home prices stabilise, ‘perhaps by the end of the year’.
The US economy grew at an annual 0.9 per cent pace in the first quarter of the year, the government said late last month, in an upward revision that calmed the nerves of some economists.
The Commerce Department initially pegged first-quarter gross domestic product growth at 0.6 per cent, the same lacklustre pace as in the fourth quarter of last year.
The revision, in line with expectations, bolsters the stance of some economists who believe the world’s largest economy will avoid a recession despite a deep housing slump, a related credit crunch and soaring oil prices. - BLOOMBERG NEWS, REUTERS
HIGHER SALES
There is a sense that US tax rebates are buoying the retail market, says Mr Greenspan.
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