Amid "signs of progress," signs it will take a while

On a day the president noted "signs of economic progress" and the Federal Reserve Chairman nodded to “tentative signs” that the recession may be easing, the government released sober reports on retail sales and business inventories.

The Commerce Department said today that retail sales dipped 1.1 percent in March, the largest decline in three months and a much weaker showing than the 0.3 percent increase that analysts expected.

Commerce also reported that business inventories dropped 1.3 percent in February, matching the January decline and close to the 1.2 percent fall that economists had expected. The sixth straight decline is the longest stretch since stockpiles fell for 15 straight months ending in April 2002, a period that covered the country's last recession.

Obama, in an economic speech at Georgetown University moments ago, tried to find a balance between the sober reality of the reports and an optimism he hopes will encourage Americans to begin spending again.

“The severity of this recession will cause more job loss, more foreclosures, and more pain before it ends,” the president said. “Credit is still not flowing nearly as easily as it should.”

He promised, however, “an unrelenting, unyielding, day-by-day effort from this administration to fight for economic recovery on all fronts.”

The reports, while worse than analysts expected, offer a sliver of promise. Seasonal adjustments could partly explain the unexpectedly weak showing in retail sales. The March 2008 performance had been boosted by an early Easter, while the holiday did not occur this year until April, delaying some shopping.

Also, the decline in business inventory was not unexpected, as companies thin their warehouses to meet the drop in sales.

Other signs of progress? They include a potential slowing in job losses, perhaps coming in part from a 20-percent increase in government-backed loans in the last month to small businesses, which account for more than two-thirds of all U.S. jobs. Also, home-mortgage rates are at their lowest point since 1971 and construction and other money is beginning to arrive from the stimulus package.

“Recently we have seen tentative signs that the sharp decline in economic activity may be slowing,” Federal Reserve Chairman Ben Bernanke said to students and faculty at Morehouse College in Atlanta. “A leveling out of economic activity is the first step toward recovery. To be sure, we will not have a sustainable recovery without a stabilization of our financial system and credit markets."

(hat tip: AP)