Recession - Greenspan warns of U.S. recession risk

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Updated: 12:23 p.m. ET Feb. 26, 2007



Greenspan warns of U.S. recession risk


Former Fed chief says downturn possible by year's end



HONG KONG - Former U.S. Federal Reserve Chairman Alan Greenspan warned Monday that the American economy might slip into recession by year's end.
He said the U.S. economy has been expanding since 2001 and that there are signs the current economic cycle is coming to an end.
"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."

Recession - Greenspan Warns of Likely U.S. Recession

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Greenspan Warns of Likely U.S. Recession

Monday February 26, 8:34 am ET

Alan Greenspan Warns That U.S. Economy May Slip Into Recession by End of Year
HONG KONG (AP) -- Former U.S. Federal Reserve Chairman Alan Greenspan warned Monday that the American economy might slip into recession by year's end.
He said the U.S. economy has been expanding since 2001 and that there are signs the current economic cycle is coming to an end.

"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.
The U.S. economy grew at a surprisingly strong 3.5 percent rate in the fourth quarter of 2006, up from a 2 percent rate in the third quarter. A survey released Monday by the National Association for Business Economics showed that experts predict economic growth of 2.7 percent this year, the slowest rate since a 1.6 percent rise in 2002.
Greenspan also warned that the U.S. budget deficit, which for 2006 fell to $247.7 billion, the lowest in four years, remains a concern.
"The American budget deficit is clearly a very significant concern for all of us that are trying to evaluate both the American economy's immediate future and that of the rest of the world," he said via satellite at the VeryGC Global Business Insights 2007 Conference.
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.

Recession - Greenspan fears recession

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Greenspan fears recession - report

Former Fed chief warns that U.S. economy nearing end of growth period.

February 26 2007: 9:06 AM EST

NEW YORK (CNNMoney.com) -- Former Federal Reserve Chairman Alan Greenspan warned Monday that the economy may fall into recession by the end of 2007, according to a published report.
Greenspan told a business conference that it's difficult to forecast the timing of recessions but that it was "possible" that one could occur later this year, the Wall Street Journal reported.
Former Fed chief Alan Greenspan
The former Fed chief, who spoke to the conference by satellite link, said the U.S. economy has been growing since 2001 and that the economy cycle is nearing an end, according to the newspaper.
"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, 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," the Journal reported him as saying.
Greenspan also said the global economy looks to be stable and that both the U.S. and world economies are more resilient than before, according to the report.

Recession - Capital Outlays Slow, Stirring Recession Fears

Economists Views : http://www.cnbc.com/id/17930693

CNBC's Liesman: Capital Outlays Slow, Stirring Recession Fears

Economists aren’t sure why capital spending is slowing, but they fret that the downturn may signal a coming recession, according to CNBC's senior economics correspondent Steve Liesman.
“It bothers me whenever I see capital expenditures slowing because, historically, it’s been such a critical part of the economy,” Maury Harris, chief economist at UBS, told Liesman. “This is happening at the same time that we have an on-going housing recession. I think it raises some red flags on the economy.”
The decline in capital spending comes as corporate interest rates are low and S&P 500 companies have about $600 billion in cash, Liesman said.
Last year, the level of share buybacks was close to the level of capital spending, Liesman said. Companies apparently decided they could get more bang for their buck by buying back stock than by purchasing new equipment, he said. Critics say such short-term spending will hurt the economy in the future.
Many believed capital spending by business would offset weakness in the housing and auto sectors, allowing what some have called the “Goldilocks economy” to continue.
But business spending on equipment and software declined in two of the last three quarters. Preliminary data suggest it’s likely to decline in the first quarter of 2007.
Economists say it’s rare to have consecutive quarterly declines in business spending that don’t precede or coincide with a recession, Liesman said.
Even Federal Reserve Chairman Ben Bernanke weighed in on capital spending during a recent appearance before Congress.
“Much of the weakness in recent months has been in types of capital goods used heavily by the construction and motor vehicle industries,” Bernanke said. “But we’ve seen some softening in demand for other types of capital goods as well.”
Most economists still look for the economy to rebound in the second half of the year, Liesman said But that rebound could be in doubt if capital spending doesn’t come back as well.