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Economists: Greenspan Less Anxious
About U.S. Economy

   Fox Market Wire
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Many economists believe that Federal Reserve Chairman Alan Greenspan is less worried about the economy than he was just a few weeks ago.

"The exceptional weakness so evident in a number of economic indicators toward the end of last year apparently did not continue in January," Greenspan said in his twice-yearly report to Congress on the state of the economy.

"Greenspan painted a cautiously optimistic view of short-term economic conditions," said Richard Yamarone, economist with Argus Research Corp. Economist Joel Naroff of Naroff Economic Advisors believed Greenspan was saying that the economic slowdown might not be ongoing.

Greenspan also said the prospects for sustaining healthy gains in productivity — the amount of goods and services produced for each hour worked — in the years ahead "remain favorable."

Gains in productivity are the key to higher living standards because they allow wages to increase without triggering higher inflation that would offset the higher wages.

"If the forces contributing to long-term productivity growth remain intact, the degree of retrenchment will presumably be limited," Greenspan said.

While consumer confidence, which can be an important ingredient on how the economy fares in the future, has fallen, for now it remains at a level consistent with economic growth, Greenspan said.

"For monetary policy, it implies that the economy could prove more resilient — provided there is no breach in confidence," said Robert DiClemente, managing director of economic and market analysts at Salomon Smith Barney.

At the beginning of the year, economic growth was close to "stalling out," Greenspan acknowledged, adding that much of the weakness came as businesses quickly cut production as sales slumped. He said, however, "at the moment we are not" in a full-blown downturn.

Nonetheless, "for the period ahead, downside risks predominate," Greenspan said. These include whether consumer confidence holds up during the slowdown and the extent to which businesses will continue to reduce production in the months ahead.

The Associated Press contributed to this report

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