DJ Fed's Bernanke: Consumer `Strong Source' Of Econ Support
*DJ Fed's Bernanke: Economy To Improve In 2H 2003
*DJ Fed's Bernanke: Business Invest Still Needs To Improve
*DJ Fed's Bernanke: Unlikely To See Much Job Growth This Yr
*DJ Bernanke: Additional Fiscal Stimulus Would Be Welcome
DJ Fed's Bernanke/Jobs -2: Growth Isn't Creating Employment
NEW YORK (Dow Jones)--Federal Reserve governor Ben Bernanke Thursday reaffirmed his belief that the economy will improve in the second half of the year, a view that's been repeated by a slew of Fed officials for some time.
Speaking at a lunch organized by the Forecasters Club in New York, Bernanke also stuck to his view that consumer spending will continue to provide an engine of growth for the economy. "I expect the consumer to remain a strong source of support," for the economy this year, Bernanke said, in response to audience questions.
He noted however, that the missing piece of the jigsaw, business investment, has yet to pick up. "The business side has to come in...that second leg has not yet come in," Bernanke said.
Fed officials, from Chairman Alan Greenspan on down, have argued on several occasions that the economy would begin to show signs of true momentum once the uncertainty caused by the war in Iraq had faded. But economic data, in particular labor market reports, that have emerged since the end of hostilities in Iraq still haven't backed up that view.
Initial claims for unemployment insurance rose to their highest level in a year in the most recent week. The four-week moving average, which smoothes out weekly fluctuations and is closely watched by private and public sector forecasters alike, also rose to a one-year high of 439,250. Economists had expected a decline of 12,000 initial claims.
Bernanke said he expects growth of 3-3.5% this year, something that is above trend. But it is "not strong enough to bring us back to full employment.".
Such growth in the economy should stop the "deterioration" of the labor market, but won't necessarily help create new jobs, Bernanke said.
DJ Fed's Bernanke/Jobs -3: No Time To Worry About Deficits
Bernanke told the audience that while he is relatively optimistic about growth this year he sees scant chance that much of it will come from overseas sources.
"We cannot count on foreign demand ... we need homegrown demand," he said.
The Fed governor said prospects for better growth this year would be aided by government spending, and he added that now isn't the time to be worrying about budget deficits.
"Some fiscal stimulus this year and early next year would be helpful," he said.
In other comments on the vital role consumers are playing in the economy, Bernanke said he sees little reason to believe mortgage refinancings will be drying up any time soon.
"It's too soon to say" if refinancings are trending down, and new home sales should stay strong in any case, he said.
The central banker explained that one outgrowth of the better U.S. economic outlook he expects later in the year is an even bigger current account deficit, a subject of worry among many private sector forecasters.
"The current account deficit will increase" but "it will not lead to crisis."
Bernanke said he wasn't worried about inflation this year and added that the Fed remained vigilant against inflation getting too low.
"Low inflation is good for the economy as a whole," Bernanke said.
He added that pricing power should improve for companies as demand picks up. |
