U.S. economy to expand 3.5 percent next year, Greenspan predicts

U.S. economy to expand 3.5 percent next year, Greenspan predicts

Former U.S. Federal Reserve Chairman Alan Greenspan says that the U.S. economy would continue its rebound and register a 3-3.5 percent growth next year. "The U.S. economy unquestionably has some momentum," Greenspan told Bloomberg yesterday. "The fourth quarter looks good. The growth rate could be 3.5 percent or more" for the last quarter of 2010. During the third quarter, the economy expanded at an annualized pace of 2.5 percent. Other positive economic data such as increased retail sales and a drop in claims of unemployment benefits indicate that a recovery may be sustained.  If the recovery gains further momentum, then companies would also likely hire more workers as current productivity maxes out, Greenspan said. About 39,000 new jobs were made during November while the unemployment rate was posted at 9.8 percent. "The unemployment rate should start coming down next year," said the 84-year-old Greenspan. "The most you can expect is that it will get down to 9 percent, or the high eights, by the end of the year."

Greenspan and his consulting company Greenspan Associates foresee surging stocks ahead as the economic recovery ups companies' earnings. "We are seeing a topping out of profit margins," Greenspan said. Fortunately, revenues are beginning to rise. That will increase profits. As earnings rise, and because equity premiums are so high, stock prices should move higher." The S&P's 500 Index has jumped nearly 12 percent in 2010 as company earnings beat expectations, economic data became increasingly positive and the Federal Reserve decided to buy Treasury bonds to spur the economy. Meanwhile, the U.S. budget deficit was at $1.29 trillion in the fiscal year which ended September 30.

Posted by James Fried on Saturday December 18 2010, 3:10 AM EST. Ref: Bloomberg. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0