"I don't think we're headed to a recession, but no question we're in a slowdown," Bush said.
The Federal Reserve is not forecasting a recession. It does predict slow growth for this year as well as higher unemployment.
"I realize that my testimony wasn't the most cheerful thing you'll hear today ... but I do very much believe that the U.S. economy will return to a strong growth path with price stability," Bernanke told the Senate Banking, Housing and Urban Affairs Committee. It was his second day in a row on Capitol Hill discussing the economy.
But this contrasts with the numbers coming out on the economy:
A government report Thursday showed the fragile state of the economy. The economy nearly stalled over the final three months of 2007. It grew at a pace of just 0.6 percent, a big loss of momentum compared with the brisk growth rate of 4.9 percent from July through September.
The National Association for Business Economics expects economic growth from January through March to slow to a meager 0.4 percent pace. Some analysts believe the performance could be even worse and actually shrink during this period. Under one rough rule, the economy would have to contract for six months in a row for the country to be viewed as in a recession.
Why do Bernanke and Bush have such a rosy view of the economy?
Bernanke and the Bush administration are hopeful the economy will turn stronger in the second half of this year, helped by the Fed's rate reductions and the recently enacted rebates for people and tax breaks for businesses.
They're "hopeful". It's one thing to be hopeful like Obama. I mean, he's not the President (yet). It's another thing to be hopeful when you are President. But I guess if you don't have any ideas for how to fix the problem, you might as well deny that it exists!
In related news:
The Commerce Department reported that spending posted a 0.4 percent rise in January, better than economists had been expecting. However, all of that gain came from a surge in inflation during the month.
Taking away the effect of rising prices, spending showed no gain in January, the second straight month that real spending failed to advance.
As we all know, the best indicator of the health of the economy is consumer spending. When it goes south, the economy slows down in accord. I suppose it's possible that it will turn around without significant aid from the federal government, but I don't think so. Read my previous posts if you need to catch up on what's going on.