Bernanke Puzzled by Weak Consumer Spending

Federal Reserve Chairman Ben Bernanke said he's surprised by how cautious consumers have been in the two years since the recession officially ended. But the Fed chief offered no hints of any steps the Fed would take to boost the weak economy.

Bernanke said Thursday that a number of factors are keeping consumers from spending more, including high unemployment, a temporary spike in energy prices, falling home prices and high debt burdens.

"Even taking into account the many financial pressures they face, households seem exceptionally cautious," Bernanke said, according to a transcript of a speech his is giving in Minneapolis.

Bernanke acknowledged that prices for gas, cars and other consumer goods have risen sharply this year. But he said the increases were partly because of temporary factors, such as supply chain disruptions stemming from the Japan crisis. He said he expects inflation will moderate in the coming months as those factors ease.

The Fed will consider range of policy options at its next meeting later this month. Bernanke said. But he offered no clues as to what it might do. His comments were familiar to ones he made last month during a speech in Jackson Hole, Wyo.

Some economists say the Fed must take further action to help the economy avoid another recession.

The economy barely grew in the first half of the year, and the government said last week that employers stopped adding jobs in August.

Consumers and businesses are feeling less confident after a rocky summer. Lawmakers fought over raising the federal borrowing limit, Standard & Poor's downgraded long-term U.S. debt, and stocks have fluctuated wildly after plunging in late-July and early August.

On Aug. 9, the Federal Reserve said it planned to keep interest rates very low until at least mid-2013, assuming the economy remained weak. Minutes from that meeting showed some Fed officials had pushed for more aggressive steps.

One possibility is for the Fed to increase the percentage of long-term Treasury securities in the central bank's mix of holdings. That approach would have the advantage of exerting downward pressure on long-term interest rates without adding to the Fed's already record-level of securities holdings.

Still, three regional bank presidents dissented from the Aug. 9 decision. They had expressed concerns that the Fed's policies were contributing to higher inflation.

The worsening jobs outlook has also put pressure on President Barack Obama. He is expected on Thursday to introduce a $300 billion jobs package before a joint session of Congress. The plan will likely include extensions of the payroll tax cut and long-term unemployment benefits, tax incentives for businesses that hire and money for public works projects.

But the effort faces strong opposition from congressional Republicans, who say that Obama's previous stimulus program was a failure. They want deeper spending cuts to fight the government's soaring budget deficits.

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29 Comments

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gak1216

Bernanke is out to lunch. What planet does he live on????

g-jersey

September 09 2011 at 10:16 AM Report abuse rate up rate down Reply
kdt34wqx

What a joke! The federal reserve floods the markets with cheap credit (freshly printed dollars), ignoring the fact that all that does is increase the price of oil, food (and gold), an then wonders why there is economic depression. Amazing.

September 09 2011 at 9:49 AM Report abuse -1 rate up rate down Reply
xxfyrehawkxx

Besides the fact that average Americans have very little money to spend, perhaps another reason is the lesson learned from our very own government. Reckless spending - even with the Fed printing money as you go - will eventually catch up with you. America's been downgraded, the American dollar is no longer considered a safe bet for reserve currency, and like the case with any bad debtor, people with money (ie China) are becoming reluctant to lend any more.

President Obama called upon the American people to be responsible about their spending. And we are. Folks no longer max out their plastic. When we can, we save our money because we all know things will get more expensive down the road. We clip coupons. We no longer take extravagant vacations or eat out. We are being frugal.

Perhaps instead of giving the $3.3 TRILLION to multinationals (like GE who didn't pay any taxes for 2010) and foreign banks (such as Barclay's and Royal Bank of Scotland), the Federal Reserves should have invested the money in the American taxpayer as a way to inject money back into the economy.

As of 2009, per the IRS website, there were 131543000 tax returns filed. Imagine what all of us lawful, taxpaying citizens could have done with a share of $3.3 trillion.

September 08 2011 at 4:56 PM Report abuse +1 rate up rate down Reply
acaddybrougham

why are we not talking gas prices stop blaming the s&p downgrade stop blaming the debt ceiling debate those are small in comparision to the real problem consumers are paying out the a@s for gas food and other things we need to survive LOWER THE GAS PRICES and keep them down then see what happens maybe we will have more money to enjoy with our families

September 08 2011 at 4:51 PM Report abuse +1 rate up rate down Reply
johnskii

This guy just doesn't get it along with Obama and most Democrat AND Republican representatives. They have been out of touch with REAL Americans to the point it's obnoxious. Bernanke what a pinhead......

September 08 2011 at 4:23 PM Report abuse +3 rate up rate down Reply
Mick & Ann

Perhaps the "average consumer" is afraid to spend because of a distrust of our President.

September 08 2011 at 4:21 PM Report abuse rate up rate down Reply
tcrab62

BERNANKE IS A DECENT FED CHAIRMAN (MUCH MORE UNDERSTANDABLE THEN GREENSPAN) BUT WITHOUT THE CHARISMATIC PER-SONA...........BUT THIS COMMENT ABOUT CONSUMER SPENDING DOES MAKE YOU WONDER IF OLE" BEN NEEDS TO RUB ELBOWS A LITTLE MORE WITH THE EVERDAY REAL WORLD WORKING MAN.

September 08 2011 at 4:19 PM Report abuse +2 rate up rate down Reply
Frank

If he truly is surprised it's time for someone else to give it a shot. Just go shopping and experience the high prices (I guess the high prices have a much bigger affect on us regular wage earners). Look at the unemployment picture and the UNDER-employment picture which tells a chilling tale. Give regular consumers and small business owners access to the "ULTRA LOW" cost money. We will put it to work and ignite the economy.

September 08 2011 at 4:04 PM Report abuse +3 rate up rate down Reply
warren

Maybe this man does'nt live in the real world like most of our pundits,politicians,and high level leaders.The average working american beyond the fact that the price of necessities have risen and most likely your wages have never been restored to the level they were at in Jan.2009.He really needs to find out about disposable income is all about.Maybe he even needs to be disposed from his job.

September 08 2011 at 3:59 PM Report abuse +4 rate up rate down Reply
Frank

Is it true that Muslims do not believe in charging or paying interest ????

September 08 2011 at 3:58 PM Report abuse rate up rate down Reply
2 replies to Frank's comment
Adele

yes

September 08 2011 at 4:05 PM Report abuse rate up rate down Reply
tcrab62

YEA BUT IF YOU DON'T PAY THEM BACK THEY CUT YOUR HAND OFF............LOL

September 08 2011 at 4:20 PM Report abuse -1 rate up rate down Reply