Washington (AP) — The nation’s largest banks expect the economy to recover from its deep slump by late summer but remain weak until next year.
“The economy will return to growth but not to health,” said Bruce Kasman, chief economist for JPMorgan Chase & Co. and chairman of the American Bankers Association’s Economic Advisory Committee.
The committee, which includes economists from Wells Fargo & Co., PNC Financial Services Group, Morgan Stanley and others, expects gross domestic product to increase 0.5 percent in the July-September quarter, after falling a projected 1.8 percent in the April-June period.
Federal Reserve Chairman Ben Bernanke said the economy could recover by the end of this year.
But jobs will remain scarce and the unemployment rate will keep rising even after the recovery begins, the committee said, peaking at 10 percent in the first three months of 2010.
Still, consumer spending has stabilized after dropping sharply late last year, Kasman said, and businesses have cut inventories, which should lead to reduced layoffs.
In addition, credit is more widely available than it was at the height of the crisis last winter due to the government’s efforts to rescue the banks, he said.
But a report from the Treasury Department Monday showed that lending by the 21 largest banks receiving federal bailout money dropped in April for the fifth time in six months. Total lending by those banks fell to $4.34 trillion, down 0.8 percent from March.
The committee also expects the housing market to bottom this year and contribute to economic growth for the first time in several years. Home prices will be “modestly higher” next year, the committee said.