The recovery has begun, but it will take time for the economy to return to pre-pandemic levels, Federal Reserve Chair Jerome Powell testified before the Senate Banking Committee on Tuesday.
“We are certainly not out of the woods yet but I would say we have started recovering,” Powell said, noting encouraging evidence from economic indicators like May’s job report and Tuesday’s retail sales numbers. “We have had encouraging evidence. Today’s retail sales was very good news.” Retail sales jumped 17.7% in May, more than twice what economists expected.
Powell said he remains "confident" of a full recovery.
“But we have to remember, we saw the largest economic shock in memory and we have to be patient with the recovery,” he said. “It is going to take some time to get all the way back to where we were.”
Given the magnitude of the shock, he noted, the fiscal response and Fed response were the largest ever. “The responses we gave to the crisis have seen positive effects so far and I think we will continue to see that going forward,” he said. “Long-term maximum employment is a great thing, for now fiscal policy is best instrument to help in the short term.”
Also speaking Tuesday, Federal Reserve Bank of Philadelphia President Patrick Harker said, he doesn’t consider the current situation “the new normal” since “none of this … is normal.”
“I expect 2020 to show a sharp recession; 2021 will be a growth year, with GDP and employment picking up, though not enough to return the economy to where it was at the beginning of this year,” he told a virtual meeting of the Chamber of Commerce for Greater Philadelphia. “All of this, of course, is quite uncertain, depending in a large part on how the virus continues to move through our society.”
Retail sales
Retail sales soared 17.7% in May, after a 14.7% plunge in April, the Commerce Department said.
Economists polled by IFR predicted it would rise 8%.
Excluding auto sales, sales rose 12.4% in the month, after a 15.2% decline the month before.
Economists expected sales excluding autos to rise 5.1%.
Year-over-year, sales are down 6.1%
Industrial production
Industrial production rose 1.4% in May, according to data released by the Federal Reserve on Tuesday, after dropping 12.4% in April.
Economists expected a 3.0% gain.
Capacity utilization gained to 64.8% in May from a downwardly revised 64.0% in April, first reported as 64.9%.
Economists expected a 66.9% level.
Business inventories
Business inventories declined 1.3% in April, after a 0.3% slip in March, Commerce said Tuesday.
Economists projected inventories fell 0.8% in the month.
NAHB
Builder confidence rose in June as the National Association of Home Builders housing market index surged to 58 from 37.
Economists expected a 45 level.
Business leaders survey
New York service sector activity in June "continued to decline significantly, though at a slower pace than in April and May," according to the Federal Reserve Bank of New York’s Business Leaders Survey.
The general business activity index narrowed to negative 40.0 in June from negative 75.8 in May.
Looking six months ahead, the general business index reversed to positive 24.8 in June from negative 4.9 in May.
