<TABLE cellSpacing=0 cellPadding=0 width=452 border=0><TBODY><TR><TD vAlign=top width=452 colSpan=2>November 8, 2008, 7.54 am (Singapore time)
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Greenspan sees US GDP down significantly in Q4
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TORONTO - It is certain that US gross domestic product (GDP) will be down sharply in the fourth quarter, but hard-hit housing prices may start to stabilise in the first half of next year, former US Federal Reserve Chairman Alan Greenspan said on Friday.
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</TD></TR><TR class=caption><TD>Mr Greenspan said he is closely watching the US housing market, overnight bank lending rates and global stock markets for insight into the economic recovery</TD></TR></TBODY></TABLE>'There's no question GDP in the United States for the fourth quarter is going to be down significantly,' he told a business audience in Toronto.
'It's clear, just looking at the trend in the monthly GDP, it's sliding at an over 3 per cent annual rate, and indeed the early data for October suggest that it's even more severe than that,' he said.
'We know we're going down, and there's very little we can do about that.'
The US economy shrank 0.3 per cent in the third quarter, the sharpest contraction in seven years, In a wide-ranging question and answer session, the former Fed chief also said that US housing prices could fall another 5 to 10 percentage points before stabilising sometime in the first half of 2009.
'The rate of (single-family house) liquidation is apparently picking up rather aggressively, and it's that which will ultimately stabilise prices, not immediately but sometime in the first half of next year,' Mr Greenspan said.
This, in turn, will allow financial institutions to better price their housing-related assets, he noted.
Mr Greenspan said he is closely watching the US housing market, overnight bank lending rates and global stock markets for insight into the economic recovery.
While government intervention in the financial system has been necessary, he said similar efforts should not be repeated in non-financial industries.
'It's important that we not replicate in the non-financial area the type of subsidisation that we, of necessity, were required to do to stabilise the financial system, which has at its root the fundamentals of systemic risk,' Mr Greenspan said.
Individual industries do not have that same risk, he added.
If the 'appropriate use' of sovereign credit can stabilise the financial system and stock markets bottom, then people will start to seek more risky investments, he said.
The current stock market pattern has 'all the characteristics of a bottom' but that may not be the case, he said.
'It may just be another stage before you go down again. I'm not going to forecast where we're going, because I frankly don't have a clue.' -- REUTERS
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</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Greenspan sees US GDP down significantly in Q4
<TABLE class=storyLinks cellSpacing=4 cellPadding=1 width=136 align=right border=0><TBODY><TR class=font10><TD align=right width=20>
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</TD><TD>Feedback</TD></TR></TBODY></TABLE>TORONTO - It is certain that US gross domestic product (GDP) will be down sharply in the fourth quarter, but hard-hit housing prices may start to stabilise in the first half of next year, former US Federal Reserve Chairman Alan Greenspan said on Friday.
<TABLE class=picBoxL cellSpacing=2 width=100 align=left><TBODY><TR><TD>
</TD></TR><TR class=caption><TD>Mr Greenspan said he is closely watching the US housing market, overnight bank lending rates and global stock markets for insight into the economic recovery</TD></TR></TBODY></TABLE>'There's no question GDP in the United States for the fourth quarter is going to be down significantly,' he told a business audience in Toronto. 'It's clear, just looking at the trend in the monthly GDP, it's sliding at an over 3 per cent annual rate, and indeed the early data for October suggest that it's even more severe than that,' he said.
'We know we're going down, and there's very little we can do about that.'
The US economy shrank 0.3 per cent in the third quarter, the sharpest contraction in seven years, In a wide-ranging question and answer session, the former Fed chief also said that US housing prices could fall another 5 to 10 percentage points before stabilising sometime in the first half of 2009.
'The rate of (single-family house) liquidation is apparently picking up rather aggressively, and it's that which will ultimately stabilise prices, not immediately but sometime in the first half of next year,' Mr Greenspan said.
This, in turn, will allow financial institutions to better price their housing-related assets, he noted.
Mr Greenspan said he is closely watching the US housing market, overnight bank lending rates and global stock markets for insight into the economic recovery.
While government intervention in the financial system has been necessary, he said similar efforts should not be repeated in non-financial industries.
'It's important that we not replicate in the non-financial area the type of subsidisation that we, of necessity, were required to do to stabilise the financial system, which has at its root the fundamentals of systemic risk,' Mr Greenspan said.
Individual industries do not have that same risk, he added.
If the 'appropriate use' of sovereign credit can stabilise the financial system and stock markets bottom, then people will start to seek more risky investments, he said.
The current stock market pattern has 'all the characteristics of a bottom' but that may not be the case, he said.
'It may just be another stage before you go down again. I'm not going to forecast where we're going, because I frankly don't have a clue.' -- REUTERS
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