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U.S. consumer spending declines further; inflation gradually risingU.S. consumer spending fell for a second straight month in December amid renewed business restrictions to slow the spread of COVID-19 and a temporary expiration of government-funded benefits for millions of unemployed Americans.
The report from the Commerce Department on Friday also showed inflation steadily rising last month. Expectations that inflation would perk up this year were supported by other data showing a solid increase in labor costs in the fourth quarter.
But a rise above the Federal Reserve’s 2% target, a flexible average, is unlikely to worry policymakers. The U.S. central bank is seen maintaining its ultra-easy policy stance for a while as the economy battles the COVID-19 pandemic. Excess capacity remains throughout the economy, which could limit companies’ ability to raise prices.
“The Fed would like inflation to average 2%, so it would like inflation to temporarily move above 2%,†said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. “Inflation pressures will remain limited to a few sectors as high unemployment will restrain wage growth.â€
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, slipped 0.2% last month as outlays at restaurants declined. Spending at hospitals also fell, likely as patients stayed away in fear of contracting the coronavirus.
Households also cut back spending on recreation. Consumer spending tumbled 0.7% in November. Economists polled by Reuters had forecast spending falling 0.4% in December.
When adjusted for inflation, consumer spending decreased 0.6% in December after dropping 0.7% in November. That likely sets a lower base for consumer spending in the first quarter.........
https://www.oann.com/u-s-consumer-spending-declines-further-inflation-gradually-rising/
