Economy will remain moribund, Bernanke says
Federal Reserve chairman Ben Bernanke isn’t the type to emote on a public stage – but his sober economic outlook was more a function of the economy’s torpor than his subdued oratorical style.
"The economic outlook remains unusually uncertain," Bernanke said to the Senate Committee on Banking, Housing and Urban Affairs Wednesday.
"In all likelihood," he added, "a significant amount of time will be required to restore the nearly 8.5 million jobs that were lost over 2008 and 2009."
His testimony comes amidst an atmosphere of mounting bad news. The government reported last week that retail sales fell in June; it was the second straight month of retail spending declines. While June’s sequential fall was not large – 0.5 percent, or 0.1 percent with auto sales excluded – it could portend further spending cutbacks among American consumers.
The dip in spending was corroborated by consumer confidence figures, which slumped in June: The Reuters/University of Michigan consumer sentiment index fell to an 11-month low. "Income and job prospects were extraordinarily weak, and those bleak prospects have made consumers much more cautious spenders," survey director Richard Curtin said on the release of the data.
The economy is heavily dependent on consumers. Without an upswing in consumer spending, there’s little hope for a sustainable recovery; higher business spending in late 2009 and early 2010 helped drive economic growth but has since abated.
Fears that the consumer won’t return to his profligate ways are driving business optimism down, too. This week, the National Association of Homebuilders reported that builder confidence fell in July.
"Builders are reporting continuing consumer hesitancy regarding home purchases due to uncertainty in the overall economy and job markets," NAHB chairman Bob Jones said.
It appears likely that Bernanke’s predictions for slow growth will be borne out.
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