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US consumer sentiment falls; producer prices keep steady rise

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WASHINGTON: US consumer sentiment fell unexpectedly in early November as households worried about their finances, the resurgent COVID-19 pandemic and the depleted fiscal stimulus, dimming the economy’s outlook as the curtain started to close on a challenging year.


The survey from the University of Michigan on Friday also showed Democrat Joe Biden’s victory in the November 3 presidential election was weighing on expectations among Republicans, with a slight gain among Democrats.


Daily new coronavirus cases have been exceeding 100,000, with hospitalisations and deaths surging, prompting some state and local governments to impose new restrictions on businesses. Restrictions and consumer avoidance of crowded places could trigger another wave of layoffs and further squeeze incomes following the loss of a government weekly unemployment subsidy.


“The drawdown in sentiment seems to reflect decreased perceptions of household finances, which may be a lagged effect of the dwindling fiscal stimulus’’, said Tim Quinlan, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. “More consumers reported lower income than higher income for the first time since 2014.”


The University of Michigan’s consumer sentiment index dropped to 77 early this month from a final reading of 81.8 in October. Economists had forecast the index little changed at 82. The survey’s measure of current conditions was steady. Its gauge of expectations fell to 71.3 from 79.2.


A measure of expectations among Republicans declined to 76.4 from 96.4. It edged up to 69.3 from 68.6 among Democrats.


A weekly unemployment supplement, which was part of more than $3 trillion in government coronavirus relief, has lapsed for millions of unemployed and underemployed workers. A second rescue package is unlikely before President-elect Biden takes office in January.


Economists expect consumer sentiment will trend lower despite promising developments on experimental vaccines.


“With more and more states starting to impose new restrictions on activity, this highlights the growing downside risks posed by the pandemic for the next few months’’, said Andrew Hunter, a economist at Capital Economics.


Stocks on Wall Street rose on upbeat results from Walt Disney Co and Cisco Systems Inc. The dollar dipped against a basket of currencies.


Exploding COVID-19 infections and labor market slack are seen keeping a lid on inflation, even as producer prices maintain their steady rise. In a separate report, the Labour Department said its producer price index for final demand climbed 0.3 per cent in October, driven by more expensive food and gasoline, after rising 0.4 per cent in September.


It was the sixth straight monthly increase in the PPI. A 0.5 per cent increase in the price of goods accounted for nearly 60 per cent of the gain in the PPI. Goods rose 0.4 per cent in September.


In the 12 months through October, the PPI advanced 0.5 per cent after rebounding 0.4 per cent in September.


Economists had forecast the PPI would rise 0.2 per cent in October and increase 0.4 per cent on a year-on-year basis.


Excluding the volatile food, energy and trade services components, producer prices gained 0.2 per cent in October. The so-called core PPI advanced 0.4 per cent in September. In the 12 months through October, the core PPI increased 0.8 per cent after rising 0.7 per cent in September.


Coming in the wake of data showing consumer prices unchanged, the PPI report further allayed fears of deflation, a decline in the general price level that is harmful during a recession as consumers and businesses may delay purchases in anticipation of lower prices.


— Reuters


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