Federal Reserve Chairman Alan Greenspan said Wednesday the odds are increasing that the U.S. economy could bounce back from the 11-month recession more strongly than many expect. The Fed chairman gave no indication that the recession is over yet, but he told reporters at the International Monetary Conference in Osaka that the "probability of a stronger-than-expected recovery is rising slightly."
It was one of the most optimistic assessments by the Fed chief since the recession began and seemed at odds with projections by many economists.
"It was still very cautious, but there's reason to be less gloomy," said economic consultant F. Ward McCarthy of Stone & McCarthy in Princeton, N.J.
While risks remain that the pickup might be neither smooth nor fast, Greenspan said the probability of a more robust comeback is growing.
Greenspan said he based the reading on economic indicators released over the past 10 days showing increased stability as the economy tries to climb out of the first recession in eight years.
Greenspan's rather optimistic assessment, while dismissed by some economists, had an immediate impact on world markets.
The stock market retreated Wednesday in an atmosphere of uneasiness over rising interest rates. The Dow Jones average of 30 industrial stocks fell 22.58 points to 3,005.37.
In the credit markets, bond prices fell and long-term interest rates rose after Greenspan's comments. Prices of the Treasury's key 30-year bond dropped $5 for each $1,000 in face value, increasing its yield to 8.38 percent.
Analysts said long-term rates are rising on the belief that a stronger economy will increase demand for credit and possibly add to inflationary pressures.
In Washington, meanwhile, a government report released Wednesday offered a gloomy long-term economic outlook.
The report noted that the productivity of American workers posted a scant gain of 0.3 percent in the first three months of 1991.
_ Information from Reuters, the Associated Press and the New York Times was used in this report.