Federal Reserve Chairman Alan Greenspan said yesterday that U.S. economic growth picked up in recent weeks but is still restrained by high oil prices.
Greenspan, appearing before the House Budget Committee, said the spring surge in energy prices weakened the economy more than analysts had expected. He suggested that uncertainty about oil prices continues to cloud the economic outlook.
Federal Reserve Chairman Alan Greenspan is questioned by a member of the House Budget Committee yesterday.
(Melina Mara -- The Washington Post)
Video: Federal Reserve Chairman Alan Greenspan said Wednesday the economy has "regained some traction" after a late spring slowdown that was triggered by a sharp spike in oil prices.
"If it weren't for the oil price spike, I would be very optimistic about where the economy is going," Greenspan said in remarks that contrasted with a more upbeat assessment in July, when he spoke of a quickening economic expansion.
Greenspan also repeated his call for Congress to restrain the growth of the federal budget deficit. He said failure to do so could cause inflation, interest rates and government debt payments to rise to economically damaging levels in coming decades.
The Fed chairman stressed that he was speaking only for himself, not for his central bank colleagues. Yet by noting signs of economic improvement, he bolstered analysts' expectations that Fed policymakers will stick to their plan to raise a key short-term interest rate when they meet Sept. 21. Financial markets showed little reaction.
"The most recent data suggest that, on the whole, the expansion has regained some traction," Greenspan said. He noted that retail sales and housing starts rebounded in July after falling in June, that job growth revived in August after essentially stalling the previous two months and that business investment has continued to rise.
However, he noted some reasons for caution. He said August retail sales appear to have been "mixed." Stores such as Wal-Marts, which market primarily to middle-income households, reported lackluster back-to-school sales. But chains with a more upscale clientele, such as Nieman Marcus, reported stronger results.
Meanwhile, automakers announced production cuts because their dealers' lots are clogged with unsold vehicles.
Other signs of weakness persist. Intel Corp., the world's largest computer-chip maker, and Rite Aid Corp., the nation's third-largest drugstore chain, lowered their sales forecasts for coming months because of sluggish sales. Delta Air Lines said yesterday that it will cut as many as 7,000 jobs -- 10 percent of its workforce -- during the next 18 months and reduce pay for its remaining employees as it tries to stave off bankruptcy.
Greenspan made his remarks as the presidential candidates fight to shape voters' perceptions of the economy in the final weeks of the campaign.