Alan Greenspan Warns of Recession
Alan Greenspan warned that we might be headed for a recession later this year.
“When you get this far away from a recession invariably forces build up for the next recession, and indeed we are beginning to see that sign,” Greenspan said via satellite link to a business conference in Hong Kong. “For example in the U.S., profit margins … have begun to stabilize, which is an early sign we are in the later stages of a cycle.”
“While, yes, it is possible we can get a recession in the latter months of 2007, most forecasters are not making that judgment and indeed are projecting forward into 2008 … with some slowdown,” he said.
Greenspan said that while it would be “very precarious” to try to forecast that far into the future, he could not rule out the possibility of a recession late this year.
It’s interesting that he doesn’t see the slowdown in housing causing a problem.
Greenspan also said he has seen no economic spillover effects from the slowdown in the U.S. housing market.
“We are now well into the contraction period and so far we have not had any major, significant spillover effects on the American economy from the contraction in housing,” he said.
It was recently reported that January housing starts were down more than 14% from the previous year.
WASHINGTON (Reuters) - The pace of U.S. home construction fell 14.3 percent in January, the sharpest drop since October that bucked two months of increases and that was much worse than economists had expected, a government report on Friday showed.
The Commerce Department said housing starts clocked an annual pace of 1.408 million units in January compared to 1.643 million units in December. Economists had forecast January housing starts to fall to a 1.60 million unit pace from December’s originally reported pace of 1.642 million units.
UPDATE 2/27/07: After the stock market dive today, other economists were quick to disagree with Greenspan calling a recession this year unlikely, although they did admit to this possibility:
| Go to Home - Most Recent PostsThe biggest risk to the five-year-old U.S. economic expansion is that the housing slump might take an unexpected turn for the worse, analysts say. In one dire scenario, not only would consumers and businesses clamp down on spending and investing, but troubles could spread to lenders dealing in risky mortgages, triggering a financial crisis.