US near recovery - Greenspan

FEDERAL Reserve chairman Alan Greenspan today told the US Congress that he sees the American economy as being on the verge of recovery.

'There have been signs recently that some of the forces restraining the economy over the past year are starting to diminish and that activity is beginning to firm,' said Greenspan.

His words were more consistent with Wall Street's prevailing view of an imminent recovery than his last public speech several weeks ago.

Today Greenspan told Congress he was encouraged by a fall in unsold goods but added that downside risks remain.

A key factor, he said, would be the job market and whether inventory rebuilding was followed by a rise in consumer spending to support the initial rebound in economic activity.

On the corporate side, he noted weakness in capital spending and said profit margins remain under pressure.

Greenspan's testimony followed news earlier in the day that weekly new claims for unemployment had dropped well below 400,000, providing another sign of a stabilising economy.

His comments appeared to rule out the chance of the Fed cutting interest rates for a 12th time in the current cycle when its policy committee meets next week, economists said.