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Washington
13 August 2009
One day after the U.S. central bank signaled a possible end to America's longest recession since World War II, new data suggest
continued weakness in several economic sectors.
Less than 24 hours after the Federal Reserve proclaimed the recession to be easing, the United States has been hit with a quadruple batch of somber economic news, with retail sales down, business inventories cut, jobless claims up and home foreclosures hitting a new record high.
Instead of the modest gain economists had been expecting, U.S. retail sales dipped .1 percent in July. Lakshman Achuthan of the New York-based Economic Cycle Research Institute says even a slight drop in sales has consequences.
"You are talking about an [American] economy that is almost $14 trillion," Achuthan said. "And that is why even a fraction of a fraction is billions and billions of dollars in activity."
Automobile sales were a bright spot in the retail sector, recording a 2.4 percent jump last month amid a government program subsidizing the purchase of new, fuel-efficient vehicles. Achuthan says America's sudden car-buying frenzy may have eaten up cash that would otherwise have gone to other sectors.
"It may be that the effort to buy a car made people hold off on buying other items like refrigerators and new dining room tables and things like that," Achuthan said.
Other economic data included a slight rise in the number of people filing initial jobless claims. The Labor Department says 558,000 newly-laid off Americans applied for unemployment benefits last week, 4,000 more than the previous week. But the total number of people receiving benefits fell from 6.34 million to 6.2 million.
Meanwhile, the Commerce Department reports American businesses cut inventories 1.1 percent in June, the tenth consecutive monthly decline.
And, despite recent signs of a turnaround in America's battered housing industry, a private group reports the number of new home foreclosure filings rose 7 percent in July from the previous month, and are up nearly a third from a year ago.
Rick Sharga is vice president of RealtyTrac, which compiled the numbers.
"This month's report was particularly dismal. We really do not see much good news in any part of the country as it relates to foreclosure activity," Sharga said.
It was a rash of home foreclosures after a prolonged period of lax lending standards that many economists blame for America's financial meltdown last year.
The day's economic data stand in contrast to Wednesday's encouraging assessment of U.S. economic conditions by the Federal Reserve. The central bank said it sees signs that the economy is "leveling out" after a prolonged downturn. Meanwhile, Europe's largest economies have returned to economic growth. Germany and France reported a .3 percent rise in second quarter gross domestic product.
Economist Lakshman Achuthan shares Federal Reserve Chairman Ben Bernanke's oft-repeated belief that U.S. economic performance will improve by year's end.
"The fact that retail sales come in weaker than expected does not change the future expectation that this recession is actually drawing to a close," Achuthan said.
Even if the U.S. economy rebounds, most economists expect the recovery to be slow, with unemployment rates remaining stubbornly high for months to come.
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