A leading United States economist believes Hong Kong has little to fear from a US slowdown. Gail Fosler, the senior vice-president and chief economist of The Conference Board, believes Hong Kong's economic fortunes are tied to the development of the China economy. 'China is more important than the US to Hong Kong,' said Ms Fosler. Ms Fosler also believes the US economy will not weaken as much as widely predicted. 'What we believe is that the economy is still fundamentally strong,' she said. 'Growth will be surprisingly good in the first quarter.' Ms Fosler, consistently voted by her peers as one of the top US economic forecasters, was surprised by the recent Federal Reserve decision to cut interest rates. 'It is difficult to say whether it was appropriate in that we do not know what would have happened in the absence of a rate cut.' Ms Fosler said retail figures from the fourth quarter would not be as bad as expected, views borne out by figures released on Friday. Retail sales in the US were up 0.1 per cent last month, helped - as Ms Fosler predicted - by car sales results. Weaknesses last month, according to Ms Fosler, stemmed from efforts to align inventories in the face of fourth-quarter earnings' problems. Inflation signals, moreover, are not alarming. The Fed is widely expected to opt for a more moderate interest rate cut in the wake of the better than expected sales and inflation figures. Ms Fosler, who raised eyebrows at the end of last year when she predicted a rate increase before any cuts, still believes the Fed will increase interest rates at some point this year. 'We believe that this is 1998 - from the perspective of the economy and 1987 from the perspective of the Fed . . . [so] the Fed will have to reverse this cut later this year.' Stating clearly that the US is not facing a recession, Ms Fosler nevertheless feels that Asia is at risk from the US economic slowdown. 'Asia is a big supplier to the US and . . . a recession in the US is a serious problem for Asia, but we are not having a recession,' she said. Last week US President Bill Clinton predicted the US would avoid a recession this year but that growth would slow.
