Bernanke: Recession Appears Over
WASHINGTON - Federal Reserve Chairman Ben Bernanke said that the worst recession since the 1930s "is very likely over" - and he was backed up Tuesday by reports showing unexpected increases in retail sales and producer prices.
But Bernanke warned that "it's still going to feel like a very weak economy," with jobs scarce and growth modest. The economic numbers out Tuesday painted the same picture of a fragile recovery:
Retail sales rose 2.7% last month from July, the Census Bureau reported. That was better than the 2% monthly gain economists had expected, according to consensus figures at website Econoday. But Joshua Shapiro, chief U.S. economist at consulting firm Maria Fiorini Ramirez, says the figures were "skewed" by the government's cash-for-clunkers program, which ignited a 11.9% jump in sales at auto dealers - highest since October 2001.
Subtracting autos, retail sales rose 1.1% from July. Compared with August 2008, last month's retail sales looked awful - down 5.3%.
Producer prices rose 1.7% from July to August, the Bureau of Labor Statistics reported, twice what economists forecast. Gasoline prices jumped 23% during the month. Minus volatile food and energy prices, wholesale prices rose a modest 0.2%.
Despite the August increase, IHS Global Insight economist Brian Bethune writes, "Inflation pressures remain contained." True, he says, prices could bounce temporarily as factories scramble to meet rising orders: They've been cutting production and living off their inventory; so expect "supply-chain start-up bottlenecks and other aftershocks from a long and painful recession."
Manufacturing in New York rebounded this month to the highest level since late 2007, according to a survey by the Federal Reserve Bank of New York. The survey suggests factory employment is falling, but the workweek is up for the first time in more than a year.
Taking questions after a speech here, Bernanke said the economy likely began recovering this quarter - technically. But the comeback will probably be weak: The jobless rate, which hit 9.7% in August, "will come down, but it may take some time."
Shapiro expects unemployment to peak above 10% next year and the economy to recover sluggishly. Consumers, whose spending represents 70% of U.S. economic activity, are reluctant to open their wallets. "The headwinds for consumer spending are formidable," he says. "Household balance sheets are a mess, and access to credit is very constrained. The labor market remains quite weak. You have all these issues facing the consumer. It's difficult to get a sustained recovery."