WASHINGTON — President Bush sought to calm the contagion of fear in financial markets Tuesday, but his upbeat tone was out of sync with a sobering new assessment from Federal Reserve Chairman Ben S. Bernanke, a jump in the prices manufacturers pay for raw materials and other unsettling economic portents.
The stock market tumbled again. Retail sales were disappointing. And some key members of Congress indicated they would try to slow down approval of a plan to bolster mortgage giants Fannie Mae and Freddie Mac. Even a substantial drop in oil prices was seen as a sign of declining confidence in the U.S. economy.
Bush, in his first comments on the economy since investors accelerated their sell-off of Fannie Mae and Freddie Mac shares last week, acknowledged "we're going through a tough time." But he insisted Americans "can have confidence in the long-term foundation of our economy."
"We will come through this challenge stronger than ever before," Bush declared at a White House news conference. "Our economy has continued growing, consumers are spending, businesses are investing, exports continue increasing, and American productivity remains strong."
But the optimistic tenor of Bush's remarks was strikingly at odds with the picture Bernanke painted in his semiannual appearance before the Senate Banking Committee. The economy is caught in cross-currents of weak growth and strengthening inflation, he said, and the combination will present a stern challenge for policymakers in the months ahead.
"The effects of the housing contraction and of the financial head winds on spending and economic activity have been compounded by rapid increases in the prices of energy and other commodities, which have sapped household purchasing power even as they have boosted inflation," Bernanke said. "Against this backdrop, economic activity has advanced at a sluggish pace during the first half of this year, while inflation has remained elevated."
Treasury Secretary Henry M. Paulson Jr. and SEC Chairman Christopher Cox also spoke out during the day, seeking to quell the economic anxiety that has gripped Wall Street and the country. But reassuring language out of Washington appeared to have little effect.
The Dow Jones industrial average sank more than 225 points in the morning as traders were spooked by Bernanke's dour pronouncements. The market recovered in mid-day when oil prices dropped, but skidded again in the afternoon in a show of investors' deep skepticism.
