MercoPress. South Atlantic News Agency

US economy on a soft “benign” deceleration path

The United States economy is experiencing a benign deceleration while Japan is close to achieving its longest expansion period in the last sixty years, said Angel Gurría, chairman of the Organization for Economic Cooperation and Development during a meeting in Warsaw.

Most markets believe the US economy is on track to a slowdown, but the majority of investors are betting on a "soft landing" and not a sudden drop that could hurt global growth and financial assets.

"The US economy is decelerating, but the overall diagnosis is benign", said Gurría talking with the press in Poland.

Last Tuesday the White House announced it was lowering the US economy growth estimate for 2006 to 3.1% given the contraction of the housing market.

The forecast from the US Executive Council of Economic Advisors together with the US Treasury Department and the Budget and Management Office cut the original estimate by 0.4 from 3.5%.

"Japan is in the process of reaching its longest growth period, not the strongest, since World War II", pointed out Gurría. OECD is scheduled to release its mid year state of the world economy next November 28.

Regarding oil Gurria said current prices do not represent a threat for global economic development".

US Presidential chief economic advisor Ed Lazear said that in spite of the lowering of 2006 estimates, economic prospects for 2007, anticipate a solid "economic growth year".

"Some of the corrections in the economy reflect a higher than expected impact from the housing sector, but other sectors remain strong", said Lazear. US inflation for 2006 is forecasted at 3% and 2.6% in 2007.