Greenspan prediction to be put to test
The most recent indications are that the US growth rate probably won’t exceed 2.2% this quarter, based on an April 10 Blue Chip Economic Indicators survey and for all of this year will amount to no more than two-thirds the 3.6% average of the 1992-2000 boom. Consumer spending shows no sign of picking up and with less than 75% of factory capacity in use, neither does business investment.
“Even once the war is over, US consumers and corporations will still be going back to a smothered economy,’ said David Wyss, chief economist for Standard and Poor’s, the New York credit rating firm. “Growth in the US and around the world will continue to be lacklustre at best.”
A new round of forecasts as the war began winding down reinforced that conclusion. The International Monetary Fund predicted on April 9 that the US economy will grow 2.2% in 2003, down from its 2.4% September forecast and not fast enough to create jobs.
On April 11, the Business Roundtable, a group of 150 chief executives, put US growth this year at 2.2%.
“What we’re seeing is a continuing trend of a weakening economy,’ said John Dillon, chief executive of International Paper Co and the Roundtable’s chairman.
Malaise in the US, the world’s biggest economy, has repercussions worldwide.
With most European economies still growing more slowly and Japan’s almost stagnant, the US is the only likely engine for global growth. Both Europe and Japan rely on exports. The IMF estimates growth in the 12-nation euro area this year at 1.1% and Japan’s at 0.8%.
US President George W Bush has put the economy on the front burner, hoping to avoid the fate of his father.
George Bush won a war against Iraq in 1991 but lost his bid for re-election a year later after voters said he wasn’t doing enough to boost jobs and growth.
The coalition’s recent victory in Iraq did remove the drag on the economy imposed by war jitters.
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