Fed's Bostic: U.S. faces short-run problems, medium-term hopes on vaccine: CNBC

WASHINGTON (Reuters) - Weak October retail sales point to short-term risks to the U.S. economy as coronavirus infections surge and families “get to the edge” of cash reserves set aside from now-expired government aid programs, Atlanta Fed President Raphael Bostic said on Tuesday.

“We have short-term and immediate-term concerns with the spike in the virus and what that is going to do in terms of businesses and the things that they are able to produce, in terms of consumers in terms of their willingness to go out and buy things. ... That is paired with some medium-term positive signs” that a possible vaccine could reinvigorate the economy next year, Bostic said in comments to CNBC.

“The vaccine is definitely positive news and it will definitely lead to a pretty robust recovery once it gets into the population deep enough,” Bostic said. But as the Fed’s Dec. 15-16 meeting approaches, “we are going to be paying really close attention to the numbers moving forward to see whether this weakness in retail sales translates into something more deep.”

Some investors expect the Fed at that meeting to change its bond buying program to provide more support to the economy in response to the renewed outbreak.

U.S. retail sales grew a less than expected 0.3% in October, with declines in some areas like bar and restaurant spending that might signal the surging pandemic has begun to influence consumer behavior.

Data on credit card spending and small business hiring has begun to show weakness beyond the government’s monthly reports, a trend economists worry could intensify as local officials impose new restrictions on business and social life to battle the outbreak.

There may be “further weakness to come, with restaurant dining now clearly trending lower and the recovery in travel apparently stalling,” wrote Andrew Hunter, senior U.S. economist with Capital Economics. “Overall consumption growth could slow sharply over the next couple of months unless the virus is brought under control.”

Reporting by Howard Schneider; Editing by Bernadette Baum and Jonathan Oatis