U.S.: Greenspan To The Markets: Stop Worrying So Much

Relax, Chicken Little: No less than Federal Reserve Chairman Alan Greenspan says the sky is not falling. For a nervous Wall Street, all but frozen by its fears that the economy was headed to hell in a handbasket, Greenspan's unusually clear assessment of business conditions on Dec. 5 was a welcome dose of reality.

The Fed chief's analysis mirrored the pattern of the recent data: They show that less-accommodative financial conditions, the result of past Fed tightening, are restraining, not bludgeoning, the interest-sensitive sectors of the economy. Demand for cars, computers, and other durable consumer goods is growing more slowly. Orders and output in key technology industries are also slowing. As a result, the manufacturing sector is getting hit disproportionately hard (chart), as it usually does when the Fed raises short-term interest rates. Notably, housing has fared relatively well, supported by low mortgage rates and healthy consumer fundamentals.