Saturday, 15 December, 2018

CPI inflation eases to 4.44% in February'18

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Stacy Diaz | 14 March, 2018, 09:43

In the 12 months through February, the CPI rose 2.2 percent, up from 2.1 percent in January as the weak reading from a year ago dropped from the calculation. Economists expected a 2.3% increase in overall inflation and core prices to rise 1.9%.

The inflation on the basis of Consumer price index (CPI) and Wholesale Price Index (WPI) was at 5.21% and 3.58%, respectively, in December 2017.

Fed officials target 2% annual inflation based on a separate index, the Commerce Department's gauge linked to consumer spending.

The latest U.S. employment report showed that average weekly earnings slowed to 2.6% in the year to February, down from 2.8% in the previous month, which was revised lower from the initial estimate of 2.9% - the one that sparked speculations that the Fed could go four or more this year instead of the forward guided three interest rate hikes.

US stocks opened higher on Tuesday as investors digested the newly released consumer price data. The decline was supported by a sharp moderation in vegetable inflation to 17% in February 2018 against 27% in January 2018 and a continuous dip in pulses and products inflation. We have also noted price increases across some major food items during our food survey in the month.

16 out of the 23 industry groups (asper 2-digit NIC-2008) in the manufacturing sector have shown positive growth during the month of January 2018 as compared to the corresponding month of the previous year. The Nasdaq Composite Index was up 36.42 points, or 0.48 percent, to 7,624.74. This was the first time since January and February 2016. A second month of cooling consumer prices should act to counter the Reserve Bank of India's hawkish bias, staying its hand in April. While the manufacturing sector grew 8.7% in January, compared with 2.5% in the same month past year, capital goods grew 14.6% and consumer non-durables 10.5% in the month under review. The food index was unchanged in February, while the energy index increased slightly.

In another data released by the government, the industrial production for the month of January came at 7.5 per cent, up from 7.1 per cent in December.

On Wednesday, the Labor Department is scheduled to release a separate report on producer prices in the month of February. IIP grew at 4.1 per cent in April-January this fiscal as compared to 5 per cent in same period in previous financial year.

In addition, the higher oil price not only directly increases energy prices but also indirectly works to make transportation more expensive.