A year after Lehman, Bernanke says recession likely over

By Caroline Valetkevitch

NEW YORK (Reuters) - A year after the Lehman Brothers collapse, Federal Reserve chief Ben Bernanke said on Tuesday the recession was likely over, while data supported hopes that recovery from the worst downturn in decades was advancing.

But Bernanke said the recovery would be slow and it would take time to create jobs. Similar warnings came from the Bank of Canada and Bank of England, whose governor also said the bank could cut the interest rate it pays on commercial banks' deposits.

The comments came exactly one year after the collapse of Lehman Brothers investment bank, an event that set off the U.S. economy's worst recession since the 1930s and helped spark a global financial crisis.

"Even though from a technical perspective the recession is very likely over at this point, it's still going to feel like a very weak economy for some time," Bernanke said after addressing a Brookings Institution conference. Fed officials meet next week to review their policy options.

The U.S. Commerce Department said retail sales climbed 2.7 percent in August after declining 0.2 percent in July. It was the biggest monthly advance since January 2006 and well above expectations on Wall Street for a 2 percent increase.

"Retail sales show the recovery is here. This wasn't just autos, it wasn't just gasoline. This was the U.S. consumer getting out of their foxhole," said T.J. Marta, market strategist at Marta on the Markets in Scotch Plains, New Jersey. "This is indisputably a good number."

Readings on manufacturing in the New York region and on national producer prices also came in stronger than expected.

Stocks in Europe and the United States rose after the retail data, with the benchmark Standard & Poor's 500 index gaining 0.3 percent to end at 1,052.63, while U.S. Treasuries prices fell, pulling benchmark yields back from two-month lows.