USA inflation accelerates in December

13 January, 2018, 03:55 | Author: Natasha Holloway
  • Retail inflation rises to a 16-month high of 5.21% in December 2017

Food inflation, as measured by the Consumer Food Price Index, rose to 4.96 per cent in December from 4.35 per cent in the previous month.

The strengthening domestic demand was underscored by other data Friday showing retail sales rising at a solid pace in December.

"Any hike in rates will probably not come until March given the last rate hike was only a month ago and we've not yet had US GDP figures for the fourth quarter", said Jacob Deppe at online trading platform Infinox.

Told to keep the inflation at 4 per cent, RBI, which has seen inflation rise beyond the comfort zone, will be under pressure to not slash the interest rate. It raised borrowing costs 3X in Y 2017.

The hardening of the CPI inflation in December 2017 was led by the sharp jump in inflation for housing, as well as a base-effect led uptick in food inflation, with a limited impact of the cut in GST rates, said ICRA today.

Overall prices climbed 2.1% in December compared with a year earlier, easing a bit from November's 2.2% annual gain. The BLS also stated that the 0.4 % increase in the shelter index accounted for merely 80 % of the 1-month all items increase.

The central bank's preferred inflation measure, the personal consumption expenditures price index excluding food and energy, has missed its target since May 2012.

For December, energy prices fell 1.2 percent after surging 3.9 percent in November.

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Core inflation rose 0.3 percent in December with core prices up 1.8 percent over the past 12 months. The indexes for apparel, airline fares, and tobacco all declined over the month. For all of 2017, retail sales were 4.2% higher than 2016, the biggest annual hike in three years.

The five-year breakeven rate meanwhile held to most of its initial gains at 1.93 percent, which was near its highest level since April. Clothing costs have fallen the past four months are down 1.6 percent over the past year.

Dallas Fed President Robert Kaplan told CNBC that he believes the unemployment rate could fall below 4 percent.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

"One of the big questions going into today was whether the [CPI] print would strengthen or weaken the case for as many as three interest-rate increases this year", said Bill Northey, chief investment officer at the private client group at U.S. Bank.

Average weekly earnings rose by 0.7% following a 0.8% increase in November.

Electricity production grew 3.9 percent in November as compared with 3.2 percent in October.

Economists, however, said it may be too early to term it as an industrial recovery.

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