Greenspan prediction to be put to test

US FEDERAL RESERVE chairman Alan Greenspan spent two months saying the war in Iraq was impeding the US recovery. Now that the fighting is over, the world is about to see whether he was right.

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.”