Still, Bernanke cited an estimate from the nonpartisan Congressional Budget Office that the spending cuts known as sequestration will cause a 0.6 percentage-point reduction in growth this year.
‘Significant’ Burden
“Given the still-moderate underlying pace of economic growth, this additional near-term burden on the recovery is significant,” he said.
The expiration of the payroll tax cut in January, coupled with climbing gasoline prices, are trimming discretionary income and may damp household purchases in the first quarter.
Congress and President Barack Obama allowed the payroll tax to return to its 2010 level of 6.2 percent from 4.2 percent at the start of the year, which means an American who earns $50,000 is taking home about $83 less a month.
The average price of a gallon of regular gasoline at the pump rose to $3.78 on Feb. 27, little changed from the previous day’s rate that was the highest in more than four months, according to AAA, the biggest U.S. motoring group.
On a brighter note, sentiment is rebound as employment grows. The Conference Board’s sentiment index jumped in February from a revised 58.4 in January, data from the New York-based private research group showed this week. The measure’s 11.2- point jump was the biggest since November 2011, offsetting much of the almost 15-point slide over the previous three months.
Interest Rates
Interest rates hovering near record lows and growing availability of credit are buoying the auto industry, including Fort Lauderdale, Florida-based AutoNation Inc., the biggest dealership group in the U.S. Attractive financing may push sales comfortably above 15 million this year, the highest since 2007.
“We have the best financing available for our customers ever,” Mike Jackson, chief executive officer of AutoNation, told a J.D. Power & Associates conference this month in Orlando, Florida.