Fed Chairman Alan Greenspan on Monday expressed new worries about an overheated economy and sounded a warning that interest
rates will be raised if the economy doesn't slow.
The U.S. economy's current expansion became the longest in U.S.
history at 107 months in February and this month is celebrating its
ninth birthday.
Greenspan, in a speech today to the Independent Community
Bankers of America in San Antonio, Texas, cautioned banks to
maintain their lending standards in the face of the remarkably
strong economy. Even though he did not discuss interest rates or
monetary policy, Greenspan's remarks contributed to Wall Street
investors' nervousness because they echoed his concerns about
Americans' inflated expectations of the economy.
In its latest snapshot of the economy, the Fed said today: "The
majority of districts reported strong growth during the survey
period, with the remaining reports pointing to moderate growth or
continued high levels of activity."
In the manufacturing sector, most districts reported a pickup in
activity in January and February, the Fed said. "The gains were
moderate in general although Richmond's report indicated
considerable strengthening."
Sales of semiconductors and other high-tech equipment were
strong in Dallas and San Francisco, the survey said. Demand for a
variety of other manufactured products grew substantially including
metal products, electronics and furniture, the survey said. Demand
for steel was especially strong, largely for use in the production
of cars and other big-ticket manufactured consumer goods.
On the retail front, the Fed found sales were strong in most
areas and either met or exceeded merchants' expectations.
Sales of consumer electronics, appliances and home furnishings
posted the biggest gains, the survey said. Demand for cars and
light trucks was solid with sales matching or surpassing activity
reported for the same period a year ago.
Some districts, however, reported sluggish sales of clothing.
Despite rising mortgage rates, residential construction activity
and sales of new homes remained strong in many areas. But there
were signs of cooling in the Atlanta and Kansas City districts and
in several states in the San Francisco district.
