The United States economy appears healthy and likely to continue growing at a moderate rate over the next year or so, causing price pressures to gradually ebb, but risks of inflation and a worse than expected housing slump could complicate said Federal Reserve Chairman Ben Bernanke in New York.
"The deceleration in economic activity currently underway appears to be taking place roughly along the lines envisioned" said Bernanke, yet "substantial uncertainties" remain. Inflation "has been somewhat better behaved of late" but also remains "uncomfortably high," Bernanke told the National Italian American Foundation in New York.
Bernanke delivered his speech just a few hours after two economic reports sent concerns that the economy may be weakening further. They showed that new orders for long-lasting durable goods, like automobiles and appliances, fell sharply in October and that consumer confidence dipped lower in November.
But the Fed chairman said that "to date, there is little evidence that the weakness in housing markets is spilling over more broadly to consumer spending" or the labor market.
The slower pace of home construction "is likely to be a drag on economic growth into next year" insisted Bernanke said. But he also pointed to signs that home sales may be stabilizing. Sales of new homes rose in August and September and sales of second hand homes rose 0.5% in October, the National Association of Realtors said Tuesday.
Bernanke said most of the economy outside of the housing market "appears to be expanding at a solid rate." Many factories are churning out more goods for export to meet rising demand from growing economies overseas. U.S. businesses are spending more on non-residential construction, equipment and software.
The US economy expanded at a sluggish 1.6% annual rate in the three months ending in September, down from a 2.6% pace in the three months ending in June. Bernanke said it is likely the economy will grow at a pace somewhere in that range during the last three months of the year.