U.S. economy still in good shape: Treasury's Kimmitt

BERLIN (Reuters) - U.S. Deputy Treasury Secretary Robert Kimmitt said on Monday America's economy remained in good shape and the housing market appeared to be stabilizing.

"Right now the U.S. economy remains strong, the outlook is positive," Kimmitt told reporters during a visit to Berlin.

"Right now some of the softness that we saw in the U.S. housing market, which I might say appears to be stabilizing, has not spread into other sectors, especially into the consumer sector," he added.

Kimmitt said the state of America's subprime mortgage market, which deals in loans to people with poor credit histories, was something the Treasury and other regulators in the U.S. were "watching closely".

A jump in default rates in the U.S. mortgage market, arousing concerns about the potential impact on mainstream lenders and on consumer spending, has hurt stock markets in recent weeks. Kimmitt declined to comment on recent stock market moves.

Turning to global trade, he said the United States strongly supported a proposal from German Chancellor Angela Merkel to expand trade flows between the United States and European Union.

Merkel wants to achieve this by reducing regulatory and other "non-tariff" trade barriers in areas ranging from financial markets to energy and the environment.

Germany, which holds the presidency of the EU for the first half of 2007, hopes the annual U.S.-EU summit at the end of April will give that initiative a lift.

EU and German officials have stressed Merkel is not proposing a traditional free trade zone that would eliminate tariffs across the Atlantic and tackle other difficult issues such as agricultural trade reform.