Merrill Lynch Drops Optimistic Economic Outlook

By John S. McClenahen For months Bruce Steinberg, chief economist at Merrill Lynch & Co., New York, kept saying the U.S. would successfully escape recession. No longer. Steinberg now says, "The outstanding question at this point is how deep a recession." Merrill Lynch's calculated answer is not very deep. It figures the U.S. economy contracted at an inflation adjusted annual rate of 1% in the calendar quarter just ended and will decline at a 1.5% in the current quarter, the final quarter of 2001. But then Merrill Lynch sees growth returning, with the U.S. economy edging upward at a 1% annual rate during the first three months of 2002. And during the second half of 2002, the economy will be expanding at nearly a 5% annual rate largely as a result of this year's income-tax and interest-rate cuts.

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