U.S. consumer spending reportedly fell in December, leading to indications that economic growth is slowing ahead of the new year. This is because the U.S. economy is facing severe supply chain issues and a troubling Covid-19 infection. On the other hand the annual inflation rate rose to the highest rate last seen in the early 1980s.
The Commerce Department said on Friday consumer spending, which accounts for more than two -thirds of U.S. economic activity was reported down 0.6% last month after posting a 0.4% increase in November. This December reading is in line with the forecast of economists who also expect a decline of 0.6%.
This data is also included in the country's gross GDP report for the fourth quarter released on Thursday. The economy grew at an annual rate of 6.9% in the last quarter, up from 2.3% in the quarter for July-September.
Consumer spending is down, likely as a result of Americans starting shopping for the holiday season in October for fear of running out of goods. The growing Covid-19 infection driven by the Omicron variant is also reducing visitors to restaurants and bars.
Shortages following an overly tense supply chain caused inflation to rise last month. The personal consumption expenditure (PCE) price index rose 0.4% after rising 0.6% in November. In the 12 months to December, the PCE price index rose 5.8%. This reading is the highest reading since 1982 and was followed by a 5.7% year -over -year increase in November.
Inflation so far is still above the Fed’s target of 2%. The Fed in early Thursday morning had expressed readiness to raise interest rates in March.
