On Friday, US Labour Department said in a statement that its Producers Prices Index, a closely observed inflation indicator which measures the average changes in prices received by the domestic consumers, had reported a modest rise of 0.1 per cent last month, bolstering views that the inflation fundamentals would remain tepid in a medium- to longer-term outlook amid an upsurge in pandemic outbreak which has been contracting a sharply slowing US labour market, leading to a decline in hourly earnings on an average.
Concomitantly, the 0.1 per cent rise in Producers Prices Index last month followed a 0.3 per cent gain in October, while Labour Department was quoted saying that the November gains had been the smallest since April, reflecting a tepid inflation outlook.
Apart from that, Friday’s US Producers Prices Index for November released earlier in the day had supported US Federal Reserve’s view that the US Central Bank would keep its core lending rate near-zero at least until end-2021, while an ECB (European Central Bank) report published a week earlier had projected that the US Fed would more likely to keep its interest rate unaltered at least until late-2023 in light of recent developments in the United States’ political landscape.
US consumer sentiment rises in early December
In tandem, other financial data released on Friday had revealed a flabbergasting improvement in consumer sentiment in early-December, reflecting US consumers’ reliance on a Biden Administration which is scheduled to take over the Oval Office by January 20.
Nonetheless, since a surprise rise in consumer sentiment earlier this month would highly unlikely to lead to a vigorous consumer spending over the holiday season, largely due to a debarkation of a number of pandemic-associated business restrictions, a senior US economist at Capital Economics in New York said following the announcement, “We saw a similar partisan boost to confidence following the 2016 election which was not followed by a spike in consumption, so we doubt this apparent rise in confidence signals a jump in spending either”.