The head of the U.S. central bank, Alan Greenspan, says American consumers and businesses have pulled back from spending after the September 11 attacks. Mr. Greenspan told Congress that the shock has been most evident in the retail and service industries.
Mr. Greenspan says the pronounced rise in uncertainty has reduced consumer spending and capital investment. He is confident that economic activity will bounce back and that the slowdown will be temporary.
The long-serving Mr. Greenspan, arguably the country's most respected economic commentator, pointedly declined to confirm that after a decade of stunning growth the U.S. economy has slipped into recession. Many private sector economists believe the economy had entered recession even before September 11.
U.S. industrial production has declined for 12 consecutive months.
Mr. Greenspan would not speculate on the growth prospects for 2002. And he would not comment on specific elements of the $100 billion spending and tax cut package working its way through Congress.
But Mr. Greenspan cautioned lawmakers that they should be prudent, saying well-intentioned policies sometimes yield unexpected results opposite to what was intended.
"I would not, at this stage, worry about how you impact the stock market, pro or con. That is going to happen no matter what you do. The focus should be on the economy. And if it is good for the economy either in the long-run or the short-run, depending on what your policy is, that is in my judgement what should be the determining factor," said the Federal Reserve chairman.
To revive the economy, the Fed has cut short-term interest rates nine times this year to their lowest level in 40 years. Mr. Greenspan says government policy in the short term has little impact on consumer confidence.