M. Ray Perryman. (File photo: RGG/Joey Gomez)

WACO, Sept. 4 - Over the past several days, various economic reports have been suggesting that the nation’s economy, though still in the recovery mode, seems to be taking the scenic route to its destination. 

By that I mean the pace during recent weeks has been slow, almost to the point of exasperation.

Some attempts to push the recovery along have netted a bit of success, but others have experienced little apparent achievement. It has been about a year since the nation’s economy returned to the positive side, but growth has been sporadic. It appeared that the 3.7 percent expansion reported for the first quarter this year might have been the first of anticipated upward movements for the future.

However, the meager 1.6 percent annual pace for the second quarter, revised down from the 2.4 percent preliminary stats, indicates that the economy is still facing a delicate balancing act. A portion of this sputter was not surprising, as we already knew the inventory accumulation that had driven much of the early recovery had run its course, and the housing incentives that had spurred a lot of activity had come to an end.

Personal consumption expenditures, the Commerce Department’s key measure of consumer spending, remain anemic. The 2.0 percent growth over the April-June period, while a little better than the 1.9 percent of the previous quarter, is not sufficient to lead the charge out of the economic doldrums. Still, high-end companies, which were among the first to feel the spending pinch during the depths of the recession, are now recovering quicker than mass-retailers.

The situation looked a bit better in July as consumer spending rose, but only 0.4 percent, much of which was the result of strong automobile sales. However, amidst this tepid good news, there was still unease in various quarters that demand might taper off during the remainder of the year if employment fails to see ongoing improvement.

On top of these concerns has been the slump in the housing market and reports that business spending and manufacturing activity seem to be cooling off, plus the tight credit and high debt situations and the fact that imports have been outstripping exports at the fastest pace in more than a quarter century. 

In quick rapid succession, perceptions of economic growth have gone from a glass half full to one half empty. Pushing the anxiety level even higher are the political machinations and pundit predictions, many of which are creating uncertainty about possible changes in fortunes and directions the recovery might take in the future depending on voting results in early November.

All these matters were among the key topics presented at last week’s meeting of the world’s central bankers which was sponsored by the U.S. Federal Reserve in Jackson Hole, Wyoming. Hovering just beneath the surface at this gathering were concerns that private-sector employers were hedging their bets and not posting “help wanted” signs to any substantial degree. In fact, corporations are sitting on trillions of dollars in cash waiting for the picture to clear up a bit.

In spite of the economic gloom pervading the Jackson Hole event, Fed chairman Ben Bernanke was generally positive about the future. His expectations for the rest of the year are for the economy to continue on the positive side, though at a modest pace, while economic growth could pick up next year.

However, recognizing that some analysts feared that the nation’s economy was wavering and that upcoming reports might tip it in one direction or the other, Bernanke claimed the Fed still had in its quiver myriad options that could be used to ease the situation and help restore confidence and capability to the nation’s economy.

The Fed chairman noted that even though the U.S. central bank had kept its benchmark lending rate near zero since the early months of the recession, he was ready and willing to institute whatever measures were necessary, conventional or unconventional, should the situation worsen and the outlook deteriorate significantly. Bernanke noted that in doing so, he would pursue the course that might reap the best results for the nation and pledged to balance the benefits of the implementation of any new monetary policies against their costs. He further promised that whatever actions he foresaw as necessary would not forestall the ability of the Fed to unwind its historic assistance as the health of the economy improves.

Doing “whatever it takes” is a great motto; translating it into action is where the rubber meets the road. How far and how fast the economy travels will be determined by multitudinous factors, but the actions of the Fed will certainly play an impacting role in the weeks and months ahead.

Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.

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