WASHINGTON -- Federal Reserve Chairman Alan Greenspan, delivering a sober assessment of the U.S. economy, told Congress Wednesday that the sharp slowdown that began in the second half of last year "has yet to run its full course."
Greenspan's comments sent a clear signal that the Fed, which already reduced interest rates by a full percentage point in January, is ready to do more to prevent the faltering economy from skidding into a recession.
Testifying before the House Financial Services Committee, Greenspan blamed much of the economy's weakness on an effort by businesses to cut back quickly on production in the face of falling sales.
Wall Street apparently found little guidance in Greenspan's remarks. After the first half-hour of trading, the Dow Jones industrial average was down 8 points and the Nasdaq index was down 3 points.
Although companies are working hard to bring their excess inventories of unsold goods into better alignment with demand, Greenspan said, the process may take more time.
Excess inventories "built up in 1999 and 2000 have engendered a retrenchment that has yet to run its full course," Greenspan said, in a departure from testimony he delivered to the Senate Banking Committee on Feb. 13.
Before Greenspan's appearance on Capitol Hill Wednesday, the government released it newest estimate of economic growth, showing a dramatic slowdown at the end of last year.
Gross Domestic Product -- the total output of all goods and services produced within the United States -- grew at an annual rate of just 1.1 percent in the final three months of 2000, the weakest performance in more than five years, the Commerce Department reported. The government had previously estimated fourth quarter growth at a 1.4 percent rate.
Greenspan also said he would keep a close eye on consumer confidence. How confidence holds up during the slowdown will be a big factor in determining whether or not there is a recession, he has said.
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