Bernanke: Economy Still Short of a Full Recovery

Posted Aug 3rd 2010 11:20AM by Connie Madon
Filed under: International Markets, Market Matters, Money and Finance Today, Personal Finance, Headline News, Housing, Federal Reserve

Speaking to state legislators, Federal Reserve Chairman Ben Bernanke detailed specific areas in the economy that are still weak and holding back full recovery.

Among them are:

Topping the list is high unemployment and a weak housing market. Speaking to this point Bernanke said: "We have a considerable way to go to achieve full recovery in our economy, and many Americans are still grappling with unemployment, foreclosure and lost savings."

On a positive note he said that consumer spending should pick up in the current quarter, as income rises and credit conditions improve. He believes that this will sustain the recovery, even as fiscal stimulus is lifted and restocking of inventories fades.
He said that bank loan losses have peaked, yet many bank balance sheets remain riddled with troubled loans.This has kept lending conditions tight. This is another problem; lending institutions must loosen up credit to stimulate large and small businesses.
Bernanke believes that inflation will remain low.
Fear of a sovereign debt crisis in Europe has contributed to market strains. Bernanke believes that the disclosure of stress tests has reduced investor anxiety.
The U.S. economy has grown for four straight quarters, but slowed to 2.4% in the past quarter.
Speculation is growing that the Fed may initiate further monetary easing, should the economy worsen.

What we have here is a Federal Reserve that is uncertain about the future. Bernanke is telling it like it is, but in doing so he may spread his uncertainty to investors. The one thing markets dislike is uncertainty.There tends to be less buying of equities and the nervous ones tend to sell out.

Tags: consumer spending, economic recovery, GDP, inthenews, sovereign debt, unemployment