Has The Economy Turned a Corner?

Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill in Washington, Wednesday, April 14, 2010, before the Joint Economic Committee hearing on the economy. (AP Photo/Pablo Martinez Monsivais AP Photo/Pablo Martinez Monsivais

Updated at 6:45 p.m. ET

Has the economy turned a corner?

Several economic indicators this week - from sales reports to government surveys to Fed chief Ben Bernanke's own comments - suggest the answer may be yes.

The economic recovery is spreading to most parts of the U.S. Merchants are seeing better sales and factories are boosting production, but many companies are still wary of ramping up hiring, the Federal Reserve reported Wednesday.

The Fed's new survey is consistent with chairman Ben Bernanke's view that a modest recovery is unfolding, although it won't be strong enough to quickly drive down unemployment now at 9.7 percent.

It was the most optimistic economic report from the Fed chairman in a long time, reports CBS Radio News correspondent Bob Fuss. Bernanke said all the indicators are positive - the market is up, businesses are making more, consumers are spending more and jobs are being created.

Bernanke Hopeful on Recovery, Wary on Jobs

Meanwhile, a flurry of reports out Wednesday suggest that many Americans are feeling better about the economic rebound.

Retail spending rose sharply and more than expected. Consumer inflation remains all but invisible. Businesses are boosting their stockpiles in anticipation of higher shopper demand.

CBS News Correspondent Anthony Mason reports that consumers drive 70 percent of the U.S. economy.

"The consumer has certainly, quote unquote, turned the corner," said Dan Greenhaus, chief economic strategist for investment firm Miller Tabak. "At least for the immediate term there is reason to be enthusiastic."

Reports Show Americans Feeling Economic Recovery

Incoming economic barometers suggest that growth in demand by consumers and businesses "will be sufficient to promote a moderate economic recovery in coming quarters," Bernanke said.

All of the Fed's 12 regions - except for St. Louis - said "economic activity increased somewhat." That was an improvement from the last Fed survey, released in early March, where nine regions reported modest economic advances. Snowstorms had crimped activity along the East Coast.

In the new survey, the St. Louis region said economic conditions had "softened." That was a downgrade from the previous report when the region reported mixed economic conditions.

The Fed report, known as the Beige Book, will figure prominently when Bernanke and his colleagues meet on April 27-28 to decide the future course of interest rate policy. Economists predict the Fed will continue to hold rates at record lows to nurture the recovery. It has kept rates at super-low levels since December 2008.

The new survey suggested that consumers - whose spending accounts for 70 percent of national economic activity - are doing their part to keep the recovery going. Retailers in most parts of the country reported sales increases, and merchants were "cautiously optimistic regarding future sales," the report said. Car sales were up in many places, as well as tourism spending.

Factories saw improvements, too. Orders, shipments and production were up in all parts of the country - except for St. Louis. Many areas reported positive results in metals and fabrication. Makers of auto and auto parts also saw improvements. Production rose for electronic equipment, computers and high-tech goods.

Trouble spots for the economy remain. The housing market is still fragile and commercial real-estate activity stayed "very weak" in most parts of the country, the Fed said.

Foreclosures are expected to hit an all-time high in a key report out Thursday, Mason reports.

"Housing is still a drag and a threat to the economic recovery," said Mark Zandi, chief economist at Moody's Analytics.

The problem has spread far beyond sub-prime mortgages, Mason reports.

The for-sale signs are discreet in Joe Lerner's neighborhood in Ponte Vedra, Fla., but many of the mansions there are being offered at fire sale prices, Mason reports. One house once worth $5 million was recently auctioned for half that, Lerner said.

"We didn't want to leave this way, that's for sure," Lerner's wife June Terry said.

After their interior decorating business dried up in the recession, they're faced with selling their house at nearly a million dollars loss or going into foreclosure on their mortgage, Mason reports.

Across the country, upwards of 4 million homeowners face similar situations, Mason reports.

Recession Over? Not So Fast Says Economic Panel
Survey: 2011 Economy Going to be Bumpy

And, job prospects are still rather bleak for the nation's 15 million unemployed. The Fed report noted that some hiring was evident, mostly for temporary workers. Overall, though, "labor markets remained weak," the Fed report concluded. Employers added 162,000 jobs in March, the most in three years, helped by a burst of government hiring for census workers. Going forward, many private economists believe job creation will be feeble, meaning the unemployment rate is likely to stay high.

Given the weak jobs market and slow-moving recovery, inflation was under wraps. For instance, most companies hiring new workers in the Kansas City region were not offering higher salaries to attract qualified candidates. In the Dallas region, only a handful of companies were planning on partially reinstating employer matches to retirement plans or giving small pay increases.

The Fed survey is based on information collected from the Fed's 12 regional banks on or before April 5. The report gives the Fed a way to keep its pulse on local economic conditions.
  • CBSNews

Comments

CBSN Live

pop-out
Live Video

Watch CBSN Live

Watch CBS News anytime, anywhere with the new 24/7 digital news network. Stream CBSN live or on demand for FREE on your TV, computer, tablet, or smartphone.