NEW YORK – Although the economic recovery has been “bumpy” as “relatively weak consumer spending” and continuing financial market woes restrain growth, “we think there is only a slight risk of a double dip,” Federal Reserve Bank of New York President and Chief Executive Officer William C. Dudley said Thursday.
“The road to recovery is turning out to be a bit bumpy as relatively weak consumer spending and the ongoing problems in financial markets are keeping growth far less robust than we would like,” Dudley told a press briefing here, according to prepared text released by the Fed.
“Growth in the third quarter may turn out to be a bit less than we saw in the first half of the year, though we think there is only a slight risk of a double dip,” Dudley said.
While manufacturing has spurred growth, “a major force behind the growth of manufacturing output has been an unusually pronounced inventory cycle. Production has expanded as firms across a variety of industries have been rebuilding their stocks to bring them into a better balance with sales,” he said.
Exports have also fueled the surge in manufacturing output.
In the past year, growth “reflects a combination of the restocking of inventories, domestic demand growth (particularly in investment goods), and higher exports,” he said.
“A number of indicators suggest that the inventory cycle may be largely complete—that is, the recent restocking has brought inventories into a better balance with sales,” he said. “If so, we will lose restocking as an impetus for growth. Despite this, we expect manufacturing output to continue to expand because of improving domestic demand and foreign demand for U.S. manufactured exports. Yet, if this recovery follows the typical pattern for past recoveries, the prospect for growth in factory jobs will likely be weaker here than the rest of the nation.”
