January 12, 2018
Core US consumer prices climbed at the quickest pace in nearly a year in December, while retail sales cooled but continued to signal strong consumer spending, data on Friday showed.
Energy prices weighed on the headline consumer price index, which rose by 0.1 per cent last month according to data from the Labor Department. That was below expectations for a 0.2 per cent gain according to a Thomson Reuters survey, and took the year-on-year increase to 2.1 per cent.
But so-called core CPI, which strips out more volatile items like food and energy, rose 0.3 per cent month-on-month — the fastest pace since January 2017. The increase in core inflation topped expectations for a 0.2 per cent rise, while year-on-year, core consumer prices climbed 1.8 per cent. The energy index — not included in the core data — declined 1.2 percent in December following a 3.9-percent increase in November, with gasoline prices falling 2.7 per cent.
Economists had also been predicting a rebound in consumer prices, as November’s figures were impacted by a sharp drop in clothing prices because of aggressive discounting by retailers over Black Friday. But prices fell once again in December, albeit by a more modest 0.5 per cent. The report also showed an uptick in the price of used cars and trucks.
Following the data, the yield on the policy-sensitive 2-year Treasury climbed above 2 per cent for the first time since the financial crisis, while the benchmark 10-year yield rose 5.6 basis points at 2.5847 per cent. Meanwhile the US dollar index trimmed its losses immediately after the data to trade 0.46 per cent lower at 91.43.
The Federal Reserve, which has currently signalled three rate rises in 2018, is closely watching inflation data as it continues to undershoot the central bank’s 2 per cent target.
Officials have so far blamed transitory factors like wireless prices for dampening inflation, but some have more recently expressed concerns that inflation expectations risk becoming anchored below 2 percent as prices have running below the central bank’s target for most of the past six years.
“For now, this report adds more weight to the idea that the run of soft numbers from March through July was ‘transitory’,” said Ian Shepherdson, economist at Pantheon Macroeconomics.
A separate report showed US headline retail sales were in line with estimates, climbing 0.4 per cent in December from the previous month when they had jumped 0.9 per cent. So-called control retail sales rose 0.3 per cent month-on-month.
The data showed a decline in sales of clothing and accessories, sporting goods, and a 1.1 per cent drop at department stores. However, sales at furniture and home furnishing stores and online sales climbed.