Economists say US crash may be avoided

Following pessimism on the US economy and projections it is heading for recession, it is now being suggested a crash may be avoided…

Following pessimism on the US economy and projections it is heading for recession, it is now being suggested a crash may be avoided.

Already the Federal Reserve's aggressive full percentage point cut in short-term bank rates last month signalled first aid was on the way, and then new data suggested the economy was merely swerving - not spinning out of control.

"Flirting with recession is different from scoring," Mr Steve Ricchiuto, chief US economist at ABN Amro said, explaining the heap of new numbers, which look forward and backward, suggest "it is much too early to declare the recession."

Last Friday a glimmer of hope appeared when the US Labour Department said job growth was still strong in January as 268,000 new jobs were added to payrolls - significantly more than the 83,000 gain that markets had expected.

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Following on the heels of strong car sales and construction data, economists said there were now more signs the economy still has pockets of strength that may allow the Federal Reserve to take more time in planning its next move.

Even a top central banker sounded a more optimistic note on Friday, two days after the Fed cut rates and about a week after Fed Chairman Mr Alan Greenspan said plainly growth may well be at zero.

Although the US economy hit an "air pocket" at the end of last year, Mr Robert McTeer, president of the Federal Reserve Bank of Dallas in Texas, said he still sees a good chance for the record-length expansion to roll on.

Financial markets, too, cheered up and pushed the dollar higher as well as snapping the bond market's three-day rally as dealers saw less need for the Fed to keep cutting rates at the aggressive half-point pace set last month.

But stocks fell as investors worried how the slowdown would affect the technology sector.

Reuters