Fed Sees Economy Improving!

Fed chairman sees economy improving
Federal Reserve Chairman Ben Bernanke said Tuesday the economy is showing some signs of improvement, but warned of sizable job losses in coming months.

Still, Bernanke sounded several hopeful notes in prepared remarks to the Joint Economic Committee.

He said the pace of economic contraction appears to be slowing, and that household spending may be stabilizing after a period of decline. Consumer spending grew in the first quarter and Bernanke said that the recently passed stimulus package, which continues to filter through the economy, is likely to bolster that further.

The housing slump also showed signs of bottoming out, he said, though sales of existing and new homes remain at depressed levels. Lower home prices appear to be contributing to increased demand for housing.

Bernanke gave a more dismal view of the business sector, stating that surveyed firms still report net declines and that commercial real estate conditions are poor.

He said the Fed continues to expect economic activity to bottom out, then to turn up later this year.

Bernanke spoke one day after stock markets continued to rally, with the Standard & Poor’s 500-stock index ending the day in positive territory for 2009. Markets were fueled by data showing any increase in construction spending.

Bernanke said there are still “substantial concerns” about the banking industry despite the market rally in financial stocks, which he said seemed due to investors adopting a more positive outlook on the condition of banks after several large banks reported first-quarter profits.

Bernanke expects many of the banks that have undergone stress tests will need no more federal dollars.

Results of the government’s stress tests on the nation’s 19 largest banks have been delivered to the institutions and will be made public Thursday.

Banks will be required to have safe levels of capital because of the tests, but Bernanke said many banks will be able to take steps with private markets to recapitalize without any or substantial help from the Treasury.

By Ian Swanson
The Hill, May 5, 2009


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