Fed Chairman Ben Bernanke Forecasts Recession to End by Late Summer

The recession is expected to end late this summer, according to reports Tuesday from the Federal Reserve and the nation's largest banks.

"The economy will return to growth but not to health," Bruce Kasman, chief economist for JPMorgan Chase & Co. and chairman of the American Bankers Association's Economic Advisory Committee, said Tuesday.

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 also says the economy could recover by the end of this year.

However, according the committee, jobs will remain scarce and the unemployment rate will keep rising even after the recovery begins, peaking at 10 percent in the first three months of 2010.

The rate will remain elevated through 2010, and will finish the year at 9.5 percent, the committee forecast, which would be above the current jobless rate of 9.4 percent.

Signs of recovery in the housing market appeared Tuesday as construction of new homes and apartments jumped 17.2 percent to an annual pace of 532,000 units. That was above analysts' expectations of 500,000 units.

Still, the huge increase in the federal government's budget deficit, which is expected to reach nearly $1.85 trillion this year, could lead to higher interest rates after 2010.

The Producer Price Index (PPI), which measures price changes before they reach consumers, fell 5 percent in the 12 months ending in May, the Labor Department said Tuesday. That was the steepest drop in 60 years. The core PPI dropped 3 percent.

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