Rising gas prices and the dearth of jobs are negatively impacting consumer confidence and bringing the first hint of inflation in a long time. The Consumer Price Index (CPI) showed an increase of 0.5 percent in December, primarily a result of skyrocketing gas costs, according to the Department of Labor. The AAA reports that the average price of a gallon of gas has soared to $3.10 nationally, the highest since October of 2008. According to a Thomson Reuters/University of Michigan study, the preliminary index of consumer sentiment for January fell to 72.7, the lowest reading since November. The number had risen to 74.5 in December and was expected to rise to 75.5 for January, according to Bloomberg News.
Quicker job growth likely will be required to accelerate improved consumer spending, even as Americans are experiencing sticker shock every time they buy gas. Unfortunately, hiring has been anemic at best, spurring Federal Reserve policymakers to expand their efforts to jump start the economy. The lack of optimism “reflects a frustration with the lack of labor market progress,” said David Semmens, an economist with Standard Chartered Bank. “Until employers start hiring aggressively enough to bring down unemployment, improvements in consumer sentiment will be slow.” According to the Federal Reserve, industrial production rose in December, advanced by gains in business equipment and home electronics. Factory, mine and utility output also rose 0.8 percent during the same timeframe, the most significant increase in five months.
Other data from the Department of Commerce showed a 6.7 percent increase in retail sales in December of 2010, the largest jump since the same month of 1999. The big winner in the retail arena was tony Tiffany & Co., which reported that November-December sales rose by an impressive 11 percent.