Federal Reserve Chairman Alan Greenspan provided a mixed message today (Jan. 11) on the subject of whether the Fed will cut interest rates again during its meeting at the end of this month, according to CNNfn.com.
Greenspan told an audience in San Francisco today that the U.S. economy appears to be stabilizing but that “significant” risks to its growth remain, including the impact of a weakening labor market on consumer spending.
An improvement is underway as indicated by the fact recent economic data has gone from “unrelentingly negative” to “mixed,” Greenspan said today.
Many economists believe the U.S. economy went into recession beginning in March 2001 and Greenspan appears to hold the opinion that the economy was poised to enter a recovery phase shortly before the Sept. 11 terrorists attacks.
But many economists believe the Sept. 11 attacks delayed the beginning of the recovery. And, today, Greenspan said, “Indications of stabilization similar in many respects to those observed immediately preceding Sept. 11 have been appearing with greater frequency” in recent weeks.
One good sign is that the rate at which businesses are shrinking their inventories is slowing, Greenspan said. But he added he remains worried that higher rates of unemployment and rising mortgage interest rates might prevent consumer demand from recovering to the point where companies will need to hire more workers to increase output.
The Fed lowered short-term interest rates 11 times during 2001 but was unable to prevent a recession.
Although lower floorplan interest rates greatly improved RV dealers’ profitability during 2001, lower loan rates did not provide much boost to the retail market for RVs. That happened because long-term consumer loan rates remained basically unchanged and, as 2001 progressed, lenders denied more RV consumer loan applications than was the case earlier last year, according to many dealers.
However, the RV industry has a history of being a leading economic indicator — either entering recessions or beginning to recover before most other segments of the economy. And data released Thursday (Jan. 10) showing that motorhome wholesale shipments increased marginally in November suggest that the RV industry’s recovery may have started.