Federal Reserve Chairman Mr Alan Greenspan said today that US consumers and businesses have pulled back from spending after the September 11th attacks, but expressed hope the economic impact has been a one-time and likely temporary event.
"The pronounced rise in uncertainty also has damped consumer spending and capital investment; households and businesses, confronted with heightened uncertainty have pulled back from the marketplace, though that withdrawal has been partial and presumably temporary," Mr Greenspan said in remarks prepared for delivery to the Joint Economic Committee of Congress.
In his remarks, the Fed chief stressed the uncertainty of the immediate economic outlook.
"The shock of the tragedies at the World Trade Center and the Pentagon has reshaped those assessments of risk and required an abrupt realignment of prices in many markets to reflect the expected costs of operating in what we now recognize as a more hostile world," the Fed chief said.
"But these adjustments in prices and in allocation of resources, when complete, represent one-time level adjustments, without necessary implications for our long-term growth prospects," he added.
Mr Greenspan said the attacks will damage productivity growth, which has been partly responsible for the record US economic expansion that has lasted more than a decade.
"The level of productivity growth will presumably undergo a one-time downward adjustment as our economy responds to higher levels of perceived risk but once the adjustment is completed, productivity growth should resume at rates in excess of those that prevailed in the quarter-century preceding 1995," he said.