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Thursday, Sep. 17, 1998
Greenspan dampens hopes of rate cut
Dow still rises, for 4th straight day, by 65 points
By ALICE ANN LOVE
Associated PressWASHINGTON -- Federal Reserve Chairman Alan Greenspan, at a congressional hearing Wednesday, lowered expectations that the central bank will move quickly, in cooperation with other major countries, to cut rates to deal with a widening financial crisis that has already plunged a third of the world's economies into recession.
Stocks still pushed higher Wednesday, giving Wall Street its first four-session winning streak since before the market began its steep summer slide. The Dow Jones industrial average rose 65.39 to 8,089.78, despite disappointment that Greenspan didn't signal an interest rate cut during his appearance on Capitol Hill.
Warning that the global financial crisis could worsen and endanger the U.S. economy if Congress fails to act, Greenspan and Treasury Secretary Robert Rubin strongly urged the House to give $18 billion to the International Monetary Fund immediately.
Greenspan told the House Banking Committee that the Federal Reserve was not ready to cut interest rates in coordination with U.S. allies, but noted that he and his global counterparts were having ``a fairly extensive conversation'' about the world economy, thus pointedly leaving the door open to such a move if they believe it necessary.
Economic hard times abroad have begun to strike some parts of the United States harder and have American business owners and families worried about the future, the Federal Reserve said.
Overall, however, the U.S. economy continues moderate growth, the Fed's most recent survey of regional economies, released Wednesday, found.
``Most districts see at least modest growth in business activity,'' the central bank said, based on reports from its 12 regional branches.
Unemployment continues low, construction and retail sales are strong, and prices are holding steady, the survey found.
In a separate report, the Fed said industrial production jumped 1.7 percent in August -- the largest gain in more than 14 years -- in a recovery from June and July declines caused mainly by strikes at General Motors.
The resurgence of output at car and truck plants meant that U.S. factories were operating at 81.7 percent of capacity in August, up from 80.6 percent in July.
But outside the rebound in auto and auto parts production, the output of American factories in August rose a mere 0.1 percent.
``Slower export activity of manufactured goods is undoubtedly the culprit,'' said Veronika White, an economist with First Union Corp.
Overseas financial troubles are damping demand for American products, including textiles and computers, and lowering prices farmers can get for crops, according to the Fed surveys taken before Sept. 8.
The New York and Dallas Federal Reserve banks gave the gloomiest reports, saying manufacturing in their regions has slowed. The Dallas bank, along with the one in Minneapolis, also described serious financial problems facing farmers.
The regional surveys, gathered in a report known as the ``beige book,'' will help guide Fed policy-makers when they meet to review interest rates Sept. 29.
Jobs remain plentiful. In fact shortages of some kinds of workers were reported in many parts of the country, including construction workers, computer programmers and retail salespeople. As a result wages are climbing a little faster than in the past.
And encouraged by unusually low mortgage rates, Americans are spending some of their rising incomes on new homes and things to fill them with. A construction boom is continuing, and retail stores, particularly those selling furniture, appliances and electronics, are doing brisk business, the Fed said.
So far, this spending spree hasn't resulted in much inflation. ``Price pressures remain relatively subdued,'' the central bank said.
Many Americans, however, don't expect the good times to last. The Fed said its surveys found ``a sharp deterioration in both business and household expectations.''
Outlooks were reported ``less buoyant'' in Philadelphia, Atlanta, St. Louis, San Francisco and Boston.
``The number of sources expressing concern about the near future is striking,'' the Minneapolis bank said.
In a third report out Wednesday, the Commerce Department said the level of business inventories on shelves and back lots remained frozen in July for a third consecutive month.
Economists closely watch stocking plans for clues about business optimism on future sales. Recessions have been triggered by the need of businesses to cut back production in order to get inventories more in line with sales.Post your comments about local news eventsFront Page || Main Index || News || Business || Texas || South Texas Outdoors || Birdwatching || Sports || Entertainment || Selena || Education || South Texas Attractions || World Wide Web