Fed Governor optimistic on economic outlook

Northwestern Financial Review, Jun 15-Jun 30, 2003 by Bengtson, Tom

Federal Reserve Board Gov. Mark Olson, in Minnesota to accept a distinguished alumni award from St. Olaf College in Northfield, delivered an economic update to a group of business leaders at an Eden Prairie Chamber of Commerce luncheon on May 22.

Olson said he is optimistic about the strength of the economy improving. "In total, there is so much positive market activity," he said. Leading economic indicators are up, he said, and "corporate America is more liquid than it has been in a decade."

He said he expects we will see new investment, an increase in merger and acquisition activity, and new capital investment in the coming months.

He said, however, that growth will be slowed by "excess capacity in some areas," and the health of the United States' international trade partners. He noted that 20 percent of the commercial real estate property in the Twin Cities is vacant.

The factors that suggest a strengthening economy, however, are numerous, he said. They include: accommodating monetary policy, a strengthening financial sector, changes in the corporate bond market, equity market performance, stimulating fiscal policy, increases in the productivity of labor, and solid household finances given lower energy prices and interest rates.

Olson commented that the economy has weathered three potentially suffocating events during the last two years: a falling stock market, terrorist attacks of 9-11, and scandals at some of the nation's largest companies.

Olson commented that the conclusion of the military offensive in Iraq has helped the U.S. economy. Immediately after the U.S. entered Iraq, stocks rose, Olson said, because the action removed a paralyzing uncertainty in the markets. "It's too early to see what the impact of the Iraqi resolution will be," Olson commented about the future.