Mr. Greenspan and his colleagues attribute the economy's current weakness to inventory adjustments, but play down their severity.

"It appears to our investors that what we are dealing with is an inventory adjustment and not a big turnaround in demand," he said.

Most analysts say the inventory adjustment is now largely complete, removing one impediment to more robust growth.

From his perspective, the United States is enduring a serious but transitory "inventory adjustment."

The company also said associated inventory adjustments will be completed in the second quarter.

The company said that flat sales, intense competition, pressure on gross margins and inventory adjustments contributed to the decline in the group's income.

As a result, he said, the inventory adjustment may take place much more rapidly than in past cycles.

"Economic activity has been receiving considerable upward impetus from a marked swing in inventory adjustment," the committee said.

"Part of the magnitude of the loss was due to inventory adjustments needed to get costs down."

The fourth quarter had special charges of $253 million, including $250 million for inventory adjustment.