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Upbeat US Economic News Boosts Hopes for Sustained Recovery

  • Michael Bowman

In U.S. economic news, retail spending surged last month amid continued low inflation - a sign that Americans believe better economic times lie ahead. Meanwhile, the head of the U.S. Central Bank says a modest economic recovery will continue, but that the United States will be hard pressed to replace millions of jobs lost during a severe economic recession that ended late last year.

For months, economists have wondered whether a fledgling economic upturn would last, or if the United States would sink back into recession amid constrained credit conditions and reluctance by businesses to hire new workers and consumers to return to the free-spending ways of the past.

But the latest report from the Commerce Department shows Americans opening their wallets, with retail sales spiking 1.6 percent in March after rising 0.5 percent in February. Consumer spending accounts for more than two-thirds of U.S. economic activity, and jumps in sales typically lead businesses to boost production, which could have a positive impact on America's stubbornly-high unemployment rate.

Separately, the Labor Department reports consumer prices rose a miniscule 0.1 percent in March, and were unchanged from February if volatile food and energy prices are excluded.

Addressing House and Senate lawmakers on Capitol Hill, U.S. Federal Reserve Chairman Ben Bernanke suggested the economic recovery - however modest - looks real and sustainable.

"A recovery in economic activity appears to have begun in the second half of last year," said Ben Bernanke. "On balance, the incoming data suggests that growth in final demand will be sufficient to promote a moderate economic recovery in coming quarters. Consumer spending continued to increase in the first two months of this year. Going forward, consumer spending should be aided by a gradual pick-up in jobs and earnings, the recovery in household wealth from recent lows, and some improvement in credit availability."

But the central bank chief was quick to add that economic hurdles remain.

"To be sure, significant restraints on the pace of recovery remain, including weakness in both residential and non-residential [home and building] construction and the poor fiscal condition of many state and local governments," he said.

Bernanke said America's ballooning national debt will constrain America's economic growth prospects over the long term, and that the U.S. job market will continue to be tight for months, perhaps years to come.

"Recently, we have seen some encouraging signs that layoffs are slowing and that employment has turned up," said Bernanke. "Manufacturing employment increased for a third month in March. New claims for unemployment continue on a generally-downward trend. However, if the pace of recovery is moderate, as I expect, a significant amount of time will be required to restore the 8.5 million jobs that were lost during the past two years."

U.S. markets seem to be giving a vote of confidence to the nation's economic prospects, with the Dow Jones Industrial Average recently climbing above 11,000 for the first time since 2008. World markets were mostly higher Wednesday amid healthy earnings reports from computer chip-maker Intel as well as banking giant JP Morgan Chase.