Bernanke low on ammo but US consumer spending increases

Zachary Goldfarb at the Washington Post writes that Federal Reserve Chairman Ben Bernanke may be low on ammo.

The truth, Bernanke has said repeatedly, is that the Fed’s ability to change the direction of the economy is limited, and it’s not clear the benefits of new measures outweigh the potential costs.

Economists say new Fed actions are likely to have only a small effect on job creation. Bernanke doesn’t have control over the two biggest factors affecting economic growth: how Congress and the president handle the government’s spending and taxation choices, and how Europe’s leaders respond to their continent’s crisis.

Just as well that data on Thursday suggest that Bernanke may be able to conserve the ammo he has for the time being. Consumer spending increased 0.4 percent in July after having been flat in June. Income rose 0.3 percent, the same rate as in June.

Meanwhile, in the UK, economic data on Thursday were mixed. Mortgage approvals rebounded in July from an 18-month low and net mortgage lending rose 1.13 billion pounds. However, net consumer credit fell 220 million pounds.

There was clearer weakness in the euro area. A report from the European Commission on Thursday showed that the region's economic sentiment indicator fell to 86.1 in August, the lowest since August 2009, from 87.9 in July.