US in­fla­tion steadily firm­ing; labour mar­ket strong

Oman Daily Observer - - INTERNATIONAL -

WASH­ING­TON: US con­sumer prices recorded their largest in­crease in nearly 6-1/2 years in the year through June, while the monthly pace con­tin­ued to sug­gest a steady buildup of in­fla­tion that could keep the Fed­eral Re­serve on a path of grad­ual in­ter­est rate in­creases.

Other data on Thurs­day showed first-time ap­pli­ca­tions for un­em­ploy­ment ben­e­fits dropped to a two-month low last week as the labour mar­ket strength­ened fur­ther. The tight jobs mar­ket is sup­port­ing in­fla­tion, and im­port tar­iffs, which are set to be broad­ened to in­clude con­sumer goods, could fan price pres­sures.

“US in­fla­tion con­tin­ues to drift grad­u­ally higher in re­sponse to a nearly fully em­ployed econ­omy, with some nudg­ing from tar­iffs,” said Sal Gu­atieri, a se­nior econ­o­mist at BMO Cap­i­tal Mar­kets in Toronto.

The Labour De­part­ment said its Con­sumer Price In­dex edged up 0.1 per cent last month on mod­er­ate gains in gaso­line prices and sharp de­clines in the cost of ap­parel and ho­tel ac­com­mo­da­tion. The CPI rose 0.2 per cent in May. In the 12 months through June, the CPI in­creased 2.9 per cent, the big­gest rise since Fe­bru­ary 2012, af­ter ad­vanc­ing 2.8 per cent in May.

With gaso­line prices ris­ing mod­estly and the cost of house­hold util­i­ties drop­ping in re­cent months, the in­crease in the an­nual in­fla­tion rate is ex­pected to slow.

Ex­clud­ing the volatile food and en­ergy com­po­nents, the CPI rose 0.2 per cent, match­ing May’s gain. That lifted the an­nual in­crease in the so­called core CPI to 2.3 per cent, the largest rise since Jan­uary 2017, from 2.2 per cent in May.

Econ­o­mists polled by Reuters had fore­cast both the CPI and core CPI ris­ing 0.2 per cent in June.

The Fed tracks a dif­fer­ent in­fla­tion mea­sure, which hit the US cen­tral bank’s 2 per cent target in May for the first time in six years. Econ­o­mists ex­pect the per­sonal con­sump­tion ex­pen­di­tures (PCE) price in­dex, ex­clud­ing food and en­ergy, to slightly over­shoot its target. Fed of­fi­cials have in­di­cated they would not be too con­cerned with in­fla­tion over­shoot­ing its target. The Fed raised in­ter­est rates in June for a se­cond time this year and has fore­cast two more rate hikes be­fore the end of 2018.

“While we con­tinue to ex­pect the next hike in Septem­ber, even the hawks may sound more com­fort­able with the cur­rent grad­ual tight­en­ing pace,” said Michael Feroli, an econ­o­mist at Jpmor­gan in New York.

The dol­lar was lit­tle changed against a bas­ket of cur­ren­cies while stocks on Wall Street were trad­ing higher. Prices for US Trea­suries were mostly flat.

LOW LAY-OFFS: In an­other report on Thurs­day, the Labour De­part­ment said ini­tial claims for state un­em­ploy­ment ben­e­fits dropped 18,000 to a sea­son­ally ad­justed 214,000 for the week ended July 7, the low­est level since early May.

That sug­gests ro­bust labour mar­ket con­di­tions pre­vailed in early July af­ter the econ­omy added 213,000 jobs in June. Steadily ris­ing in­fla­tion, how­ever, is eat­ing into work­ers’ mod­est wage gains. In­fla­tion-ad­justed av­er­age weekly earn­ings rose 0.1 per cent in June fol­low­ing a sim­i­lar gain in May.

While econ­o­mists do not ex­pect in­fla­tion to ac­cel­er­ate much from cur­rent lev­els, they cau­tioned that the Trump ad­min­is­tra­tion’s pro­tec­tion­ist trade mea­sures could boost prices. Tar­iffs on lum­ber, alu­minium and steel im­ports have left man­u­fac­tur­ers fac­ing ris­ing in­put costs.

So far, they have not passed on those higher costs to con­sumers. Pres­i­dent Don­ald Trump im­posed the tar­iffs to pro­tect do­mes­tic in­dus­tries from what he says is un­fair com­pe­ti­tion from for­eign man­u­fac­tur­ers. Last week, Trump slapped 25 per cent tar­iffs on $34 bil­lion of Chinese im­ports. On Tues­day, Trump threat­ened 10 per cent tar­iffs on an ad­di­tional $200 bil­lion of Chinese goods.

“We do not an­tic­i­pate much move­ment in the year-ago rate of core CPI over the next few months,” said Sarah House, a se­nior econ­o­mist at Wells Fargo Se­cu­ri­ties in Char­lotte, North Carolina. “Broad­en­ing tar­iffs, in­clud­ing the pos­si­bil­ity of con­sumer goods get­ting hit di­rectly, cre­ate some up­side risk to our in­fla­tion fore­cast in the se­cond half of the year, how­ever.”

* Con­sumer price in­dex rises 0.1 per cent in June * CPI up 2.9 per cent year-on-year * Core CPI gains 0.2pc; up 2.3pc year-on-year * Weekly job­less claims fall by 18,000 to 214,000

— Reuters

Price tags for de­li­cious red, and granny smith ap­ples and red pota­toes are on dis­play at a gro­cery store in Aven­tura, a planned, sub­ur­ban city in north­east­ern Mi­ami-dade County, Florida, United States.

Newspapers in English

Newspapers from Oman

© PressReader. All rights reserved.