Global trade is a “surprisingly positive factor” in the U.S. economy, Dennis Lockhart, president and CEO of the Federal Reserve Bank of Atlanta, said in a speech at Macon State College Oct. 1.

“A worldwide recovery is materializing, led by the developing economies of East Asia and India,” Mr. Lockhart said. “Data released last week indicate that global trade increased at its fastest pace in five years. Foreign demand is expected to add about 1.3 percentage points to the U.S. gross domestic product once the final numbers are calculated.” 

Mr. Lockhart cautioned, however, that the bump in global trade may not be permanent as U.S. trading partners cut back on government economic stimulus spending. “It should be said that this resurgence also reflects sizeable government stimulus spending, the effect of which, like here in the United States, could be transitory,” Mr. Lockhart said. 

Speaking to a standing-room-only crowd, the Fed executive painted a mixed picture of the U.S. economy. “Unquestionably, the economy is improving,” Mr. Lockhart said. “But the vital signs – as captured in macroeconomic data – are mixed. There are pluses and minuses, positives and negatives. It’s not a uniform picture. Optimism is warranted but should be tempered by awareness that this an economy temporarily buttressed by a large number of temporary government support programs.”

The housing market is the key to an economic recovery, he said. “The housing market has begun to improve as measured by sales volumes, prices and new home starts,” said Mr. Lockhart. “Yet new and existing house inventories remain high suggesting a weak residential construction outlook.”

He noted that housing has been helped by government programs, including a first-time homebuyer’s tax credit, which expires Dec. 1. Mr. Lockhart expressed concern about commercial real estate, saying the downturn in that sector could cause a setback in banking. “I see as uncertain the time required for the housing market to return to health, the potential commercial real estate drag on the financial system, the sustainability of recovery in the absence of government supports and the resurgence of private demand,” he said. “I see all those as uncertain.”