WASHINGTON – The U.S. economy looks set to improve throughout 2002, with strong productivity growth, a business spending pick-up and an improving employment picture, U.S. Treasury Secretary Paul O'Neill said Tuesday.
Calling economic optimism "the obvious choice" in the current environment, O'Neill said: "I believe we are going to see continued improvement throughout 2002. Productivity growth will stay strong, if not always at the 2001 fourth quarter's ... rate."
U.S. nonfarm productivity grew at an annual pace of 5.2 percent in the fourth quarter.
O'Neill said business spending would benefit from inventory restocking, consumer confidence would increase as job growth accelerates and the employment picture would start to improve. He reiterated that, by year-end, he expects U.S. gross domestic product to be approaching the 3 percent to 3.5 percent annual growth rate "the U.S. economy can sustain."
He credited the recovery to the timing of the Bush administration tax cut package, enacted in 2001, the low cost of capital in the United States and the Federal Reserve's aggressive rate-cutting campaign, which saw the central bank lower interest rates 11 times in 2001 by a total of 4.75 percentage points to a roughly four-decade low of 1.75 percent.
"That action appears to have succeeded in maintaining credit expansion and liquidity in the economy," O'Neill added.