- The Washington Times - Thursday, April 11, 2002

The economy grew at an "especially good" rate over the past three months, but the growth will moderate for the rest of the year, and there are risks from higher oil prices, the chairman of the White House Council of Economic Advisers said yesterday.
In an interview with The Washington Times, R. Glenn Hubbard gave an upbeat assessment of the economy, suggesting that its growth rate in the first quarter will be very strong somewhere in the 4 percent to 5 percent range that most blue chip business economists have been predicting. He called those forecasts "pretty reasonable."
The economy's closely watched gross domestic product, which shows how fast the economy is growing, will be the first important measurement of the administration's economic policies in a pivotal election year. And Mr. Hubbard left little doubt that the GDP number is going to show explosive growth in the economy as it emerges from last year's recession.
While he refused to estimate what the first-quarter growth rate will be, he said "the first quarter will be especially good," pushed upward by new business orders, increased consumer and government spending, and higher consumer confidence.
The recovery will ratchet downward somewhat to more moderate levels after that. "Growth will be likely higher in the first quarter than the rest of the year," he said.
While some economists fear that the absence of strong business earnings thus far suggests the economy could fall back into another slump or "a double dip," Mr. Hubbard said that was very unlikely.
"Barring very unforseen events, such as another terrorist attack, I just don't see the chance of a double dip," he said.
"There are still risks to the economy that shouldn't be discounted. Energy price increases, for example, or any slowdown in investment recovery relative to what many private economists are forecasting. But on balance, I see a pretty good recovery this year," he said.
"It will not be as rapid a growth as we saw in the very late 1990s, but it will be at or above potential growth this year," he said. The administration's fiscal 2003 budget set potential long-term growth at 3.1 percent.
Mr. Bush's chief economic adviser, Lawrence Lindsey, has forecast the economy will grow by around 3 percent for the year.
Mr. Hubbard said the economic data he has been reviewing "reflect a couple of things. One is that business investment strength should be returning around the middle of the year.
"Consumer spending continues to hold up very well. For the rest of the year, demand will be fine, but the pace of inventory buildup is not as likely to be as great for the balance of the year," he said.
Mr. Hubbard credited the recovery to a strong monetary policy at the Federal Reserve, which has cut interest rates, President Bush's 10-year, $1.3 trillion tax-cut package, and new business investment incentives in the stimulus bill that Mr. Bush signed earlier this year.
Meanwhile, he said, rising energy prices continue to concern him. "The danger is there. If we have a runup in energy prices that acts as a tax on households' purchasing power, just as if we've raised taxes, that could retard growth for the rest of the year," he said.
On the jobs front, Mr. Hubbard said: "I don't think we'll see big increases in payroll employment until well into spring or early summer. We're not out of the woods on employment. It's another reason to be cautious at the present time."

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