Federal Reserve Chairman Alan Greenspan is suggesting that the economy may be able to grow faster than even productivity figures indicate, as companies start to reap benefits from the last decade’s investment binge, The Wall Street Journal is reporting today.

The Fed chief has long believed that information technology has lifted long-term productivity growth, and thus the rate at which the economy can grow without fueling inflation. His comments Friday suggest his optimism has grown recently, based on an examination of how investment booms can temporarily hurt productivity while investment busts can help.

Higher productivity, or output per hour, enables companies to produce more and pay higher wages without raising prices, thereby raising living standards. Its growth accelerated to 2.4% from 1995 to 2000, from 1.4% in the two preceding decades. It held up surprisingly well during last year’s recession, and in the October 2001-March 2002 period, growth soared to an annual 7%, according to government data released last week.

Before new equipment can boost productivity, a company must spend time and money to install it, often disrupting other operations, and then workers must learn to use it. Because of these “disruptive effects,” underlying productivity growth in the late 1990s, when investment boomed, “may have been somewhat underestimated,” Greenspan said after a speech at a Federal Reserve Bank of Chicago conference.

Conversely, when companies halt new capital projects, there is less disruption and they can spend their energy getting more out of what they have already installed, boosting productivity. Greenspan said one reason for the 7% productivity growth in the last two calendar quarters may be “that contrary to what intuition would suggest,” last year’s investment bust enhanced productivity by reducing disruption.