Greenspan Prescription Restores Health Fed Chief’s Strategy Paves The Way For Steady Growth, Low Inflation
New signs of strength in manufacturing, construction and the overall economy suggest growth is steady and concerns about recession that caused much hand-wringing are no longer much of a threat.
The major economic reports released Wednesday indicate the economy is sticking to the course of moderate growth and low inflation charted by Federal Reserve Chairman Alan Greenspan - a course that has thrilled Wall Street and driven stock prices to dizzying heights.
A monthly survey of purchasing executives showed manufacturing activity improved in April for the first time since last summer. The government reported construction spending shot up in March.
An index designed to forecast economic activity six to nine months in advance also showed a March rise, its second in a row.
“This is what the doctor ordered, Dr. Greenspan,” said Sung Won Sohn, chief economist at Norwest Corp., a banking company.
Greenspan’s prescription for the economy has brought the results he was seeking. By raising, then lowering, short-term interest rates, the Fed chairman appears to have guided the economy to a “soft landing,” where economic growth is sustained.
In the three reports Wednesday:
The National Association of Purchasing Management said its manufacturing index improved to 50.1 percent in April from 46.9 percent in March, the first time since July 1995 it has risen above 50 percent.
The Commerce Department reported construction spending rose 3.1 percent in March, the biggest gain in four years.
The Conference Board reported its Index of Leading Economic Indicators rose 0.2 percent in March, marking its first consecutive monthly gains in 1 years and its highest level in a year.
The private research group said the improvement followed an increase of 1.3 percent in February and a revised drop of 0.6 percent in January.