Treasury Secretary Paul O'Neill began a four-state, three-day tour of the US, telling small-business owners and executives that while the recovery may feel like a recession, the economy is still growing.
"Key economic indicators such as inflation, real wages, productivity, interest rates, business profits, and the housing sector are all strong because of the resilience and determination of the American people," O'Neill told the economic conference in Waco convened by President George W. Bush.
PHOTO: AP
While "for a lot of folks out there, it doesn't feel like a recovery yet," economists "who study the numbers all say the recovery is underway," said O'Neill, who hosted a panel that focused on ideas for generating growth and jobs.
PHOTO: AP
"I thought I heard some new ideas -- maybe not intellectually brand new -- but forcefully delivered," such as accelerating Bush's 10-year, US$1.35 trillion in tax cuts that were passed last year, he said.
Midway through the conference, Federal Reserve officials announced in Washington they had left the benchmark overnight bank lending rate unchanged at a 41-year low of 1.75 percent, while indicating the economy's recovery from recession is less assured than it was just a few months ago.
The Standard & Poor's 500 Index ended the day down 20 points, or 2.2 percent, at 884.21. The dollar weakened against the euro and yen.
The Conference Board's index of consumer confidence fell nine points last month, the biggest drop since October. The Institute for Supply Management's factory index fell to 50.5 last month, the weakest reading since February.
"We've clearly hit some sort of air pocket here in the middle of the year, and some forecasters have reacted to it," said Joel Prakken, chairman of Macroeconomic Advisers LLC, a St. Louis-based economic forecasting firm. "The administration hasn't" reacted, "and it's just too early to know which group is going to be right." O'Neill acknowledged the economy isn't in perfect shape and called on Congress to boost growth by passing terrorism risk insurance and Bush's energy and homeland security plans while restraining "wasteful spending" that threatens a return to budget surpluses.
"We're moving in the right direction, but we're not where we want to be, not yet," he said.
There are positive signs. With gasoline and auto sales included, retail sales rose 1.2 percent in July and 1.4 percent in June, the first back-to-back increases this year.
Automakers sold 1.52 million cars and light trucks in July, equivalent to an annual sales rate of 18.1 million vehicles.
O'Neill has long maintained the economy will be expanding at an annual rate of 3 percent to 3.5 percent by yearend.
O'Neill said he can't do much about the financial markets' problems. "I wish it were possible to do something as simple as gurgle like a baby to make the markets feel better," he told Fox News.
Some corporate executives say they don't accept O'Neill's claim that the economy is on an upswing.
"I know the politicians would all like to argue that things are rosy," said Scott McNealy, chief executive officer of Sun Microsystems Inc. in an interview with Bloomberg TV yesterday.
"We're still facing a very, very challenging economic environment."
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