MercoPress. South Atlantic News Agency

Greenspan: “one third probability” of recession

Former Federal Reserve Chairman Alan Greenspan said there's a “one-third probability” of a recession this year in United States and that the current expansion won't have the staying power of its decade-long predecessor.

"We are in the sixth year of a recovery; imbalances can emerge as a result," Greenspan, 81, said in an interview Monday at his office in downtown Washington. "Ten-year recoveries have been part of a much broader global phenomenon. The historically normal business cycle is much shorter" and is likely to be this time, he added. Greenspan's outlook contrasts with the prediction of his successor Ben S. Bernanke, who told Congress last week that the economy may strengthen this year. Bernanke's upbeat assessment helped steady stock markets on February 28 after a plunge the day before that some traders attribute partly to Greenspan's musing that a recession couldn't be ruled out. "It is possible that we can have a recession at the end of this year," said Greenspan, who was head of the Federal Reserve for 18 years until January 2006. The day after he mentioned the risk of a recession to a Hong Kong audience on February 26, a Commerce Department report showed sales of non-military capital goods excluding aircraft dropped 2.7% in January, the biggest decline since September 2001. Little more than a year after leaving the central bank, Greenspan is returning to economic forecasting, a role he enjoyed before entering government service in 1974, during the administration of President Gerald R. Ford. He isn't trying to predict a number for gross domestic product or inflation: he's trying to capture the trend and when it might be about to change. The Fed expects the economy to grow between 2.5 and 3% this year, and 2.75% to 3% next year, according to forecasts presented to Congress last month. Negative February Consumer Price Index in Chile: -0.2% Chile's Consumer Price Index deflated 0.2% in February, totaling 0.1% in the first two months of 2007 and 2.7% in the last twelve months, according to a release from the country's National Statistics Institute. The monthly index reported lower prices for Transport (-2.7%); Clothing (-0.4%) plus Leisure and Education (-0.1%). Increases were registered for Housing (1.26%); Others (0.6%); Food (0.1%) and Health services (0.1%). The consumer price index which does not include the more volatile items of fresh fruit and vegetables and fuel, remained flat in February but accumulates 3.1% in the last twelve months. Fruits and vegetables dropped 2.3% and 0.8% in the last twelve months. Fuel prices diminished 1.5% in February with an annual twelve months variation of -0.9%. Meantime the Producers Prices Index in February 2007 deflated 3.2% and 4% in the first two months of the year. In the last twelve months the index advanced 7.3%. Areas with the largest drop in prices are Mines and Quarries (-8%); Agriculture, Livestock, Hunting and Forestry (-2.2%); and Fisheries -3.8%. On the other end Electricity, Gas and Water jumped 1.9%. The cost of labor increased 4.8% in January and labor incomer per hour 5.8% in the last twelve months.