THE US recession “is very likely over”, Federal Reserve chairman Ben Bernanke said yesterday as data showed retail sales rose last month at the fastest rate in more than three years.
Sales rose 2.7 per cent, with the expected boost from the popular “cash for clunkers” car rebate programme accompanied by a surprise pick-up in other spending.
This raised hopes that US consumers might be re-emerging from the rubble of the housing market collapse, the roller-coaster ride in equities markets and rising unemployment.
“This is a consumer that is in a lasting full recovery mode,” said Chris Rupkey, at the Bank of Tokyo/Mitsubishi UFJ. “The Fed is going to need to stop talking about its exit strategy and start implementing it if today’s data keeps up.”
Others were more cautious, pointing out that August was the back-to-school month. “I’d like to see if this is just a one-month bounce or an actual trend,” said Adam York, at Wells Fargo. Many economists believe that consumer spending will be constrained for months by households’ limited access to credit and their desire to reduce their debts. However, after a long period of near-stagnant spending, there may be pent-up demand for some goods.
Mr Bernanke, who did not comment directly on the sales report, remained cautious about the shape of the recovery. He said he expected a “moderate” recovery in 2010 with growth “not much faster than the underlying potential growth rate of the economy” – which means about 3 per cent.
Car and car parts sales jumped 10.6 per cent in August thanks to the now-defunct clunker scheme, while petrol stations’ sales also jumped 5.1 per cent as the price of oil rose during the month.
But even excluding all car-related purchases and petrol, retail sales were up a healthy 0.6 per cent with increased spending on clothing, sporting goods, books, electronics and food.
Meanwhile, wholesale prices rose 1.7 per cent in August after falling 0.9 per cent in July. The rise was greater than analysts expected, given a lot of spare capacity in the economy, and was led by an 8 per cent rise in energy prices and a 23 per cent jump in the cost of petrol.
“With gold at $1,000 an ounce, we are concerned about the outlook for inflation later in 2010 and this report suggests that inflation pressures may be beginning to stir in manufacturing,” said John Ryding and Conrad DeQuadros, economists at RDQ Economics.
US president Barack Obama echoed Mr Bernanke’s comments when he promised struggling carworkers he was committed to rebuilding a thriving US auto industry and said the economy was on the mend. “It’s going to take some time to achieve a complete recovery,” Mr Obama said during a visit to General Motors’s sprawling Lordstown plant in Ohio. – (Copyright The Financial Times Limited 2009)
