Banking Economists See Recovery

WASHINGTON - Increased consumer spending, especially stepped-up home and auto sales, are clear signs that the U.S. economic recovery is proceeding, the American Bankers Association's economic advisory committee said.

But the 11-member panel of bank economists said the pace of expansion will be slower than the average for postwar recoveries, in part because of debt burden and caution over extending credit.

Softer export gains, weak capital spending, continuing commercial real estate problems, and budget woes at all levels of government are seen as adding to the drag on the economy.

Sustaining the recovery will require noninflationary monetary growth by the Federal Reserve. This growth should be in the range of 2.5% to 6.5%, said the advisory committee's chairman, Sung Won Sohn, who is chief economist and senior vice president of Norwest Corp.

He said the pressure on bank earnings - including a nearly 300% increase in deposit insurance premiums since 1989, higher delinquency rates, and bankruptcies - are limiting credit availability.

There were no indications that credit standards will ease markedly.

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