Bernanke says Europe woes impact on US 'modest'
- 9 June 2010
- From the section Business
Europe's debt crisis will only have a "modest" impact on the US economic recovery, the chairman of the Federal Reserve has told Congress.
Ben Bernanke said he was confident the US would avoid double-dip recession - despite woes in Europe and worries at home about jobs and the housing market.
The US faced a slow recovery, he said, adding it would take time for the jobless rate, now 9.7%, to reduce.
The Fed predicts that the US economy will grow by 3.5% this year.
"The economy... appears to be on track to continue to expand through this year and next," Mr Bernanke told the House Budget Committee.
Meanwhile, the US Beige Book - a monthly snapshot of economic performance in 12 regions - suggested that economic activity had picked up in all the areas studied.
It is the first time this has happened since December 2007, just before recession began.
Manufacturing and retail sales improved while tourism also grew. However the commercial property market remained weak and job market conditions improved only "slightly".
And White House economic adviser Paul Volcker has told a conference in Canada that the US economy faces a "considerably long slog" to return to normal growth patterns.
"In the United States we have had now, or are approaching, a year of recovery," he said.
"But by past standards, it hasn't been much of a recovery."
There have been worries that the US recovery could be derailed, with one perceived threat being that if the debt crisis in Europe spread, this could limit lending around the world, including in the US.
But Mr Bernanke said he was confident the US would emerge relatively unscathed from the problems in Greece, Portugal and elsewhere in Europe.
If markets continue to stabilise, then the effects of the crisis on economic growth in the United States seem likely to be "modest", he said.
While accepting it might have an impact of US exports and so "leave some imprint on the US economy", he said the US would benefit from lower prices for oil and investors turning to the safety of US government bonds, amid volatile stock markets.
A report last week suggesting that jobs created by private US companies had slowed sharply in May has also added to worries.
The Fed chief also urged Congress and the White House to begin planning to trim the US budget deficit - which hit $1.4tn (£962bn) last year.
Not doing so could dent the economy in the long term, Mr Bernanke said, adding that Europe's debt problem was a reminder of the need for countries to get their finances under control.