US shoppers and businesses are feeling better about the recovery.
That was the encouraging message from a trio of economic reports on Wednesday — and from US Federal Reserve Chairman Ben Bernanke, who told lawmakers that the country’s modest rebound is sustainable.
Retail spending rose sharply last month. Sales surged 1.6 percent, the US Commerce Department said, up from February’s revised 0.5 percent gain. That was better than most economists had predicted.
Increases were posted across the board. Car dealers, home furnishing stores, building suppliers, sporting goods stores, clothing retailers and general merchandise stores all reported gains. Auto sales surged the most since October.
Separately, the government said consumer prices inched up just 0.1 percent last month. Excluding food and energy, prices were unchanged last month. Over the past 12 months, those prices have risen at the slowest pace in six years. Still, households remain under pressure as hourly earnings fell again last month.
Businesses also boosted their stockpiles for the second straight month in February. That’s a sign that they expect consumers to keep spending.
The recovery has begun to benefit the largest banks, such as JPMorgan Chase & Co, marking the latest sign that the biggest banks are gradually putting the financial crisis behind them.
JPMorgan reported on Wednesday a US$3.3 billion first-quarter profit on solid gains in the financial markets. Its report also signaled some good news on the economy: The dollar amount of its loans in or near default fell.
The positive news lifted spirits on Wall Street. The Dow Jones industrial average finished up nearly 1 percent and other major stock indexes surged even more.
Some economists were surprised by the retail sales gains, especially in light of the current 9.7 percent unemployment rate.
“Unemployment rates may be high, consumer confidence may be low and job and income gains may be minimal, but that doesn’t seem to be stopping people from shopping,” said Joel Naroff, chief economist at Naroff Economic Advisors.
Naroff and others are questioning whether the spending gain can be sustained.
“We still fear it won’t be,” Paul Ashworth, a senior economist at Capital Economics, wrote in a research note. “High unemployment, weak income growth, low confidence, tight credit conditions and the need for debt [reduction] all point to restrained consumption growth over the next couple of years.”
In his testimony on Wednesday to Congress, Bernanke said the Fed reported the recovery was spreading to most parts of the country.
Merchants are enjoying better sales and factories are boosting production, but companies are still wary of ramping up hiring, the Fed reported.
Bernanke also told Congress that the recovery was not strong enough to shrink the unemployment rate much.
He urged lawmakers and the White House to produce a plan to reduce record-high budget deficits.
The deficits are unavoidable now, given the damage from the recession, Bernanke said. He warned, however, that the red ink ultimately posed risks to long-term US economic health.
Paring the deficit could aid the economy by lowering longer-term interest rates and raising consumer and business confidence, Bernanke told the Joint Economic Committee.
For now, the Fed’s survey of the economy is signaling optimism.
It said 11 of the 12 Fed regions reported economic activity rose modestly.
That was an improvement from its last survey, when nine regions said so. Snowstorms had crimped activity along the East Coast. In the new survey, only the St Louis region said economic conditions had “softened.”
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