IIP grows by 8%; inflation by 5.2%

13 January, 2018, 05:07 | Author: Terri Saunders
  • RBI to cut rates 25 bps in Apr to signal lower lending rates BofAML

The Labor Department said Friday that the December increase in consumer prices followed a much bigger 0.4 percent jump in November and was the smallest advance since a similar 0.1 percent rise in October.

Core Inflation rose by 1.8%, beating expectations of only a 1.7% rise, the same as November - the Dollar rose and fell in volatile swings after the release of the contradictory data.

But they didn't change their projections for gradually raising interest rates, citing in part restrained inflation pressures, and they penciled in three rate increases for this year after raising the benchmark federal-funds rate to a range between 1.25% and 1.5% last year.

India's consumer price index (CPI) or retail inflation stood at 5.21% in the month of December 2017 - higher from 4.88% in November 2017 and 3.41% in the similar month of previous year. Eggs, vegetables and fruits became costlier, while inflation moderated for cereals and pulses. The so-called core PPI increased 0.4 percent in November.

But analysts drilling into details of the data note that inflation was accelerating in the final quarter of the year, which means the Fed may be right that the lack of price pressures earlier in 2017 was due to one-off factors. Food prices rose 0.2% after being unchanged for two straight months.

The Fed raised interest rates by 0.25% last month in its third hike of 2017, which left rates at their highest level since the financial crisis and the fall of Lehman Brothers.

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"We've been seeing stronger gains in core inflation, and I think there are good reasons to expect core inflation will be stronger this year as well", said Michael Pearce, senior USA economist at Capital Economics.

Consumer durables output grew 2.9 percent in November, against a contraction of (- 6.9 percent) in the month before, indicating a revival in demand.

Last month, gasoline prices fell 2.7 percent after rebounding 7.3 percent in November.

"At a very minimum, one can say that core CPI has convincingly stopped declining and is holding firm only a little beneath the Fed's 2 per cent inflation target", said Derek Holt, chief economist at Scotiabank. Fed policymakers have pencilled in three rate hikes in 2018 following three past year. In the same month a year ago, growth was 1.5 percent.

Meanwhile, despite reports of healthy sales from some stores during the holiday shopping season, department store sales declined 1.1 percent from the prior month, while sporting goods stores fell 1.6 percent. Manufacturing grew 10.2 per cent against 2.5 per cent in October.

In a major improvement, fifteen out of the twenty three industry groups in the manufacturing sector showed positive growth in November 2017.

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