U.S. Federal Reserve Chairman Ben Bernanke said on Tuesday the U.S. economy faced significant risks to growth, while dismal data flashed fresh signs of stagflation.
In its semi-annual monetary policy report to Congress, the Fed raised its projection for growth in 2008, but this provided cold comfort to investors caught in financial market turmoil and consumers facing job losses and soaring energy prices.
Economists are also likely to attribute the Fed's rosier growth outlook largely as a result of government economic stimulus checks, which many consumers have already spent.
"The possibility of higher energy prices, tighter credit conditions, and a still-deeper contraction in housing markets all represent significant downside risks to the outlook for growth," Bernanke said in remarks to the Senate Banking Committee.
Worringly, he also said risks of faster inflation had intensified on the back of the rising prices of energy and other commodities. For details see
Data released on Tuesday showed troubling signs for inflation coupled with slow economic growth.
Total sales at U.S. retailers rose a less-than-expected 0.1 percent in June, as auto sales posted their biggest drop in more than two years, a Commerce Department report showed.
Also on Tuesday, General Motors said it would cut employment costs, sell assets and borrow at least $2 billion (1 billion pounds) to bolster its finances in the face of plummeting sales.
The Labor Department said producer prices over the last 12 months jumped 9.2 percent, the biggest increase since a 10.4 percent gain in June 1981 when the United States was last mired in a low-growth, high-inflation period known as stagflation.
