U.S. economy begins to feel Asian crisis<\/p>\n
By Martin Halusa<\/p>\n
NEW YORK (DPA): The sharp economic slowdown in Asia is
\nstarting to be felt in certain regions of the United States,
\naccording to a report by the Federal Reserve which compares
\ngrowth in its 12 regional districts.<\/p>\n
Seven of the districts of the \"Fed\" -- the U.S. central bank
\n-- have reported declining sales to Asia since the onset of the
\nfinancial crisis there. Most affected so far are the computer
\nindustry around the San Francisco region, which includes Silicon
\nValley, manufacturing industries in New England, and the textile
\nproducers farther south along the Atlantic coast in states such
\nas Virginia, Maryland and the Carolinas.<\/p>\n
Moreover, these companies are complaining not only of less
\ndemand from Asia, but of falling sales in their own and other
\nmarkets due to tougher competition from Asian exporters.<\/p>\n
These companies have gained in competitiveness following the
\nsharp currency devaluations in many of the Asian countries. With
\nthe U.S. dollar remaining strong, American-made goods and
\nservices have become relatively more expensive.<\/p>\n
And yet, despite these negative factors outlined in the most
\nrecent issue of the report, the so-called \"Beige Book,\" the Fed's
\nvice-chairman, Alice Rivlin, insisted that the overall American
\neconomy was in \"excellent shape.\"<\/p>\n
According to the Beige Book, growth has remained strong, even
\nif some cooling is expected in coming months. Indeed: the U.S.
\neconomy grew by an annualized 4.8 percent during the first
\nquarter, but many analysts and economists expect that pace to
\nslow markedly, perhaps down by up to two percent, in the second
\nquarter.<\/p>\n
This could put pressure on the Fed to leave interest rates
\nunchanged at its next meeting, on tomorrow. It last raised rates
\nin March 1997.<\/p>\n
Inflation in the United States, meanwhile, remains at its
\nlowest level in three decades, and the same can be said of
\nunemployment, with several of the Fed districts even reporting
\nsome labor shortages. This tightness in the labor market,
\nhowever, has so far not translated into any detectable upward
\npressure on wages.<\/p>\n
\"Production and employment remain high, while inflation
\nremains low,\" according to the Beige Book. \"The economy is still
\non course for growth.\"<\/p>\n
In most Fed districts, manufacturing -- which is most
\nsusceptible to weakening demand abroad -- remains robust. This is
\nespecially true of the districts centered in St. Louis, Chicago
\nand Kansas City; the regions centered in Atlanta, Dallas and
\nRichmond, Virginia are reporting weakness, along with New
\nEngland.<\/p>\n
Despite these weak points, the Beige Book predicts that the
\neconomy can expect continued growth, with private consumption and
\na high rate of investment in new factories and plant and
\nequipment taking up the slack from any fall in exports.<\/p>\n
The building sector is also doing well. Only agriculture is
\nhurting badly, but this has less to do with the crisis in Asia
\nthan with falling grain and livestock prices.<\/p>\n
Indeed, in Rivlin's view the U.S. economy has never been
\nhealthier. \"We all reckoned on a drop (in the growth rate),\" she
\nsaid. \"But the drop has been less than we expected.\"<\/p>\n
However, the Asian crisis is worse than expected, and while it
\ncontinues the hopes that all regions of the United States could
\nget back to higher growth are withering. Asian turbulence has
\nclearly had an impact.<\/p>\n
The key to a recovery in Asia is in Japan, but the Beige Book
\ncites a \"serious recession\" there. Representatives of the G7
\nindustrial nations, along with their counterparts from some Asian
\ncountries, warned Japan on June 20 that it \"urgently needed\" to
\nrestructure its wobbly financial system.<\/p>\n
If the Japanese did so in a comprehensive way, they were told,
\nthe worst might be over by the end of this year.<\/p>\n
At the same time, Rivlin, the deputy to the Federal Reserve
\nBoard chairman Alan Greenspan, still appeared worried about
\nfurther tightening in the U.S. labor market. Years of strong
\ngrowth have tightened it to the point where it \"is the greatest
\ndanger for the future development of inflation,\" the Beige Book
\nwarned.<\/p>\n
Pessimists on the stock markets took this as a hint that the
\ncentral bank is toying with a rise in interest rates.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/us-economy-begins-to-feel-asian-crisis-1447893297",
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