US not headed for recession, says American economist

A TOP United States economist has reassured a Singapore audience that despite some predictions to the contrary, the US economy is not headed for a recession.

Dr Jay Bryson, global economist at Wachovia Corp, the US' fourth-biggest bank, said this week's stock-market slump is not the start of the end of the bull run.

He was addressing the American Chamber of Commerce at a breakfast meeting at the Pan Pacific Hotel yesterday.

He said US growth is expected to slow from 3.5 per cent last year to about 2.5 per cent this year. He added that global economic growth is also expected to lose steam from 4.9 per cent last year to about 3.9 per cent this year.

Earlier this week, former US Federal Reserve chairman Alan Greenspan rattled markets by warning that the US could slip into recession by year-end.

However, Dr Bryson was more upbeat, attributing continued US growth to the private sector. Net exports were positive last year and corporate profits as a percentage of economic growth were at a 30-year high of about 16 per cent.

'The health of the corporate sector is very good now,' he said.

Turning his attention to China, he said economic growth can be attributed to two key drivers: a shift in labour from rural areas to the coast and the high savings rate which helps fund investments.

With these fundamentals in play, growth will continue.

He also said this week's market slump does not signal 'the beginning of the end' for the bull run - it is merely a correction.

In the light of a resurgent Japanese economy and the rise of China and India, would a downturn in the US still affect Asia?

Dr Bryson is confident it will. 'Maybe it will not affect Asia as much as it did 10 years ago, but the US economy is still between 20 and 25 per cent of the global economy. You take 25 per cent away, it's going to affect Asia.'