U.S. could face mild recession, Greenspan quoted

Former U.S. Federal Reserve chairman Alan Greenspan speaks at the Per Jacobsson Foundation Lecture on the ''Balance of Payments Imbalances'' at the International Financial Corporation in Washington in this October 21, 2007 file photo.

SINGAPORE (Reuters) - U.S. economic data suggests the world's biggest economy could face a mild recession, former Federal Reserve chairman Alan Greenspan was quoted as telling Asian investors on Wednesday.

"He said that the data coming out of the U.S. so far suggests a mild recession. The risk is really on the housing side," a participant quoted Greenspan as telling a closed-door Deutsche Bank investor meeting in Singapore via videolink from Washington.

Greenspan, who was quoted as saying earlier this month that the U.S. has fallen into an "awfully pale recession," also told the investor meeting that the credit crisis would end when home prices in the United States begin to stabilize.

"When home prices stabilize that would mark the end of the credit crisis," the participant quoted Greenspan as saying.

"The last part of liquidation will only occur in early 2009, but he argued that it is likely home prices could well stabilize before that," added the participant, who declined to be identified.

The U.S economy is reeling from a housing-led slowdown, with some analysts convinced it is already in a recession despite a 0.6 percent growth rate in the first quarter of 2008.

The Fed has cut it's key overnight lending rate by 3.25 percentage points to 2.0 percent since mid-September in a bid to prevent the housing downturn from spilling over to the broader economy.

Greenspan also said that global prices could remain firm because the effect of China's cheap exports is waning.

"We are entering a period where the disinflationary pressure from the exports of China have bottomed out," the participant quoted Greenspan as saying.

"Low cost labor in China probably reached its peak in late 2006 and early 2006. We are beginning to see gradually rising inflationary pressures, which would be probably subdued during the current period of slowdown, but will surely re-emerge when the economy begins to pickup," he quoted Greenspan as saying.

(Reporting by Saeed Azhar)