WASHINGTON, Oct 22 — The US economy is growing again although it is unclear what will propel it once government stimulus runs out, White House economic advisor Lawrence Summers told Reuters yesterday.
“There’s really no doubt that the third quarter registered growth, and growth at a nontrivial rate, and every expectation that the fourth quarter will do the same,” Summers said at the Reuters Washington Summit.
Summers, who heads the White House’s National Economic Council, said the US$787 billion stimulus package and inventory rebuilding by businesses were among the “dominant drivers” that lifted the economy out of its deep recession.
“So the question of what will propel growth throughout the expansion is still a crucial one,” he said. “But that’s always the case at the beginning of expansions.”
Most private economists think the recession, which began in December 2007, ended in the third quarter. But there is much disagreement about the path of recovery.
Some see above-average growth continuing through next year, arguing that deep recessions are typically following by powerful recoveries, helped along by pent-up demand as consumers and companies resume spending.
But others worry that heavily indebted households will remain cautious in their spending, particularly with unemployment near 10 per cent and likely to drift higher, which would restrain the recovery.
Summers acknowledged that the jobless rate would remain elevated for some time, and said there was not yet a basis for confidently forecasting very rapid growth.
“So economic slack remains a central problem,” he said.
What more President Barack Obama’s administration might do about it remains unclear, particularly with the budget deficit growing to 10 per cent of total output and projected to remain high in the coming years.
Summers nodded to those worries, and the possible implications for the value of the US dollar, and said he took “very seriously” longer-term concerns about indebtedness.
Earlier on Wednesday, Commerce Secretary Gary Locke told Reuters Television the dollar, which has hit 14-month lows against a basket of currencies, was a “concern,” since dollar weakness could push up the price of oil and other imports.
Summers said the price of oil, which hit a one-year high above US$81 (RM275) a barrel yesterday, did not risk throwing the US recovery off the rails.
“I think the increase in oil prices is probably ... more a reflection of recovery and the expectation of continued recovery than a threat to recovery,” he said. — Reuters
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