Tags: Larry Summers | Market | Sugar High | Economy | Robust Growth

Larry Summers: Market on 'Sugar High,' Economy Far From Robust Growth

(Getty/Chip Somodevilla)

By    |   Thursday, 30 March 2017 10:19 AM

Larry Summers, former Treasury secretary and Harvard University president emeritus, warns that he thinks the economy is far from robust growth and the market is really on a sugar hill.

“I've been worried for some time. We may be seeing a kind of sugar high and that sugar highs tend to be followed by much less happy periods," he told CNBC.

“It isn't clear that we're going to get a sugar high beyond the market because you have seen for some time highly optimistic sentiment. The GDP figures for the first quarter, most people don't think they're going to be very good," said Summers, the 71st United States Secretary of the Treasury from July 1999 until January 2001.

"There is nothing in any data suggesting that we're moving toward that 3% to 4% growth standard,” said Summers, who was the Chief Economist at the World Bank from 1991 to 1993.

“Sentiment is often not always a signal of what's going to happen and it depends on how long that sentiment persists. My sense would be that if you continue to have the degree of division, confusion, rancor and uncertainty in Washington that we've seen, we may not see those sentiment changes lasting as long as many people thought they would a couple months ago,” Summers said.

“I would be cautious about any big revision to the up side in forecasts and if you look at forecasts -- if you have look at most hard core economic forecasters, they differ in what's going to happen but very few of them are predicting some big break to the up side," he said.

"I think they think the Fed is sort of controlling the thermostat here and if we get more of that boomy stuff, we're going to get higher interest rates and if we get less of that boomy stuff, we're going to get lower interest rates so I don't think there's room for a big rally,”

Meanwhile, earlier this week the Associated Press reported that U.S. economic growth is expected to accelerate this year and next, yet remain modest, even if  President Trump's promised tax cuts and infrastructure spending are implemented, a survey found.

The economy will grow a solid 2.3 percent this year and 2.5 percent in 2018, according to 50 economists surveyed by the National Association for Business Economics. Those rates would be up from 2016's anemic pace of 1.6 percent.

Still, those rates are below the 3 percent to 4 percent growth that Trump has promised to bring about through steep corporate and individual tax cuts and more spending on roads, airports and tunnels. Most of the economists surveyed assume that a tax reform package will be approved by Congress this year. About two-fifths expect an infrastructure spending proposal to pass this year, while rest forecast it will happen in 2018 or beyond.

(Newsmax wires services contributed to this report).

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Larry Summers, former Treasury secretary and Harvard University president emeritus, warns that he thinks the economy is far from robust growth and the market is really on a sugar hill.
Larry Summers, Market, Sugar High, Economy, Robust Growth
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2017-19-30
Thursday, 30 March 2017 10:19 AM
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