US consumer spending declines for second straight month, inflation crawls up

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US consumer spending declines for second straight month, inflation crawls up

US Commerce Department data released earlier on Friday had revealed that the lifeblood of US economy, US Consumer spending that accounts for roughly two-third of entire economic activities in the world’s largest economy, declined for a second straight month in December, as a raft of renewed business restrictions inclined to contain a recent resurgence of pandemic outbreak alongside a momentary expiration of state unemployment benefits for millions of Americans appeared to have taken a great-than-anticipated toll on an ailing US economy.

Aside from that, other financial data released on Friday had also revealed that the US inflation had been perking up last month, while other fiscal data showing a steep rise in labour costs over the fourth quarter of 2020 had bolstered views that US inflation would step up this year.

Nonetheless, a rise in inflation above US Federal Reserve’s target of 2 per cent this year would unlikely to result in a rate hike, as the Fed Chair Jerome Powell was quoted saying in a press briefing held after January FOMC minutes that the US Federal Reserve would continue to keep its interest rate steady until solid signs of recovery, while several analysts had said that the US Central Bank would more likely to continue its dovish policy stance in order to help cushion up the fiscal blows stemming off the pandemic outbreak.

US Consumer spending falls further, inflation creeps up

Besides according to US Commerce Department data released earlier on Friday, US Consumer Spending declined 0.2 per cent in December following a tumbling of 0.7 per cent a month earlier, as spending at small businesses such as restaurants fell further amid a decline in in-house customers, while hospital spending slipped as well as pandemic-wary patients were reportedly averting US healthcare centres in frets of contracting the pandemic contagion.

Meanwhile, adding that an uptick in inflation pressure might be offset by a higher unemployment rate in a medium- to longer-term outlook as a pandemic resurgence raged across the United States and Europe, a Chief economist at PNC Financial in Pittsburgh, Gus Faucher said late in the day, “The Fed would like inflation to average 2%, so it would like inflation to temporarily move above 2%.

Inflation pressures will remain limited to a few sectors as high unemployment will restrain wage growth.