U.S. News: Summers Outlines Risks to Recovery
ST. LOUIS -- White House economic adviser Lawrence Summers said Monday that there were signs the U.S. economy was returning to normal, but he warned that "major slack" remained and that weak demand would continue to crimp output.</br></br>"[L]ack of demand will be the major constraint on output and employment in the American economy for the foreseeable future," Mr. Summers told the annual meeting of the National Association of Business Economics here. "The combination of low capacity utilization and substantial leveraging of household balance sheets raises questions about the sustainability of demand growth going forward."</br></br>Mr. Summers spoke after the NABE released its annual forecast. "The good news is that this deep and long recession appears to be over, and with improving credit markets, the U.S. economy can return to solid growth next year without worry about inflation," said NABE President-elect Lynn Reaser of Point Loma Nazarene University in California.</br></br>More than 80% of the 44 forecasters surveyed by the NABE believe the economic recovery has begun, but they anticipate modest growth -- a 2.9% pace in the second half of 2009 and a 3% rate next year. They predict the Federal Reserve won't begin raising interest from the current zero-0.25% range until late next spring and won't lift its key short-term interest rate above 1% before 2011.</br></br>The NABE members said markets would take time to heal from the economic crisis. Most said markets wouldn't improve to the point where they no longer hurt economic growth until after the first half of next year.