US report and figures ease fears of economic recession

The US economy was expected to continue its record expansion this year, although with slower growth, and avoid falling into recession as some doomsayers have been predicting, according to the president's annual economic report published today.

The economy is in a record 10th year of expansion since the last recession ended in March 1991, but a recent slowdown has stirred some fears that another recession might be on the horizon.

The '2001 Economic Report of the President' - the last for President Bill Clinton's administration before he leaves office on January 20 - forecast slowing economic growth, a slight increase in the unemployment rate and inflation kept in check this year. If achieved, that would mean a classic soft landing in which growth slows without throwing huge numbers of people out of work.

President-elect George W Bush and his aides have expressed mounting concern over the economy's prospects, and said the slowdown was an argument for enacting his $1.3 trillion proposed tax cut.

The White House report forecasts were based on data available as of November. 17, 2000. Since November an apparent economic slowdown has deepened, prompting the Federal Reserve to aggressively cut interest rates last week.

The report measures GDP growth on a fourth quarter over fourth quarter basis. It predicts the 2001 figure will be 3.2% growth, compared with 4.1% figure expected for 2000.

Inflation as gauged by the consumer price index (CPI) was forecast to stay fairly controlled. A rise in inflation can be a harbinger of higher interest rates, which in turn tend to spook the stock market. The report forecast a 2.5% increase in the CPI, compared with an anticipated 3.4% rise in 2000.

The report also forecast that the unemployment rate would tick up to 4.1% in 2001 from 4% in 2000. And productivity growth, which reflects the economy's ability to keep generating wealth, was forecast to increase at a 2.5% rate this year, compared with 3.7% in 2000.

* US retail sales edged up 0.1% in December from the previous month, the Commerce Department reported today.

The report defied predictions of slump in retail sales as a result of the slowdown in the US economy. Most forecasts suggested a 0.3% decline in sales.

Separate figures showed that inflation at the wholesale level was unchanged in December compared with November, but excluding food and energy, producer prices gained 0.3%.

Wall Street analysts had foreseen an increase of 0.3% in the overall producer price index and a rise of 0.1% in the core rate.

The PPI reading was the weakest since a decline in August, while the core rate rose at the fastest pace since May.

Analysts said the report could discourage the Federal Reserve from intervening aggressively to lower interest rates in the face of a slowing economy.