Summers sees US soft landing more possible than few months ago

FORMER Treasury Secretary Lawrence Summers said a “soft landing” for the US economy is looking more likely, though inflation gauges remain too high.

“I’d say I’m encouraged, but I still think it would be a mistake to say we’re out of the woods,” Summers said in an interview on CNN’s Fareed Zakaria GPS broadcast on Sunday (Feb 5). Inflation indicators remain “unimaginably high” compared to two or three years ago, and getting back to the Federal Reserve’s target “may still prove quite difficult”, he said.

With the pace of US consumer price increases slowing, the US economy added 517,000 new jobs in January, far exceeding estimates and driving the unemployment rate to 3.4 per cent, the lowest since 1969.

“It looks more possible that we’ll have a soft landing than it did a few months ago,” Summers said.

On Friday, Summers highlighted the risk of a sudden downturn in the economy after the surge in jobs growth.

The question is whether the income will be spent and lift the economy or whether companies at some point conclude they have too much inventory and too many workers, leading to a “fairly sudden stop”, Summers, a Harvard University professor and paid Bloomberg contributor, said on Bloomberg Television’s Wall Street Week with David Westin. BLOOMBERG