Inflation in spotlight amid market plunge

With fears of accelerating inflation sparking the stock market’s free-fall over the past 10 days, this week’s report on the consumer price index could get more attention than usual. But the reading is likely to be surprisingly tame. Economic news this week also brings the latest snapshots of retail sales, housing starts and industrial production.

Investors panicked early this month when the January jobs report showed annual wage growth picking up to 2.9% from 2.5%. That triggered fears of stronger inflation and faster interest rate hikes by the Federal Reserve. Overall monthly inflation probably did gain some steam in January as a result of rising gasoline prices, says PNC Financial Services Group. But because of a relatively high reading a year ago, that likely pushed annual inflation down compared to the prior month. Core inflation, which strips out volatile food and energy items and which the Fed watches more closely, likely rose more modestly on a monthly basis as temporary factors such as a spike in rent faded, says Nomura economist Lewis Alexander. Economists estimate the Labor Department will announce Wednesday that the consumer price index (CPI) rose 2% annually in January, down from 2.1% the previous month while the core CPI increased 1.7%, down from 1.8%.

Retail sales have been booming in recent months as solid job and income growth lift consumer confidence. That narrative likely continued in January despite a cold weather spell early in the month. Economists predict the Commerce Department will report that retail sales rose a solid 0.3%.

Industrial production also has performed well, propelled by a resurgent global economy and U.S. oil industry. Economists expect the Fed to report

Thursday that industrial production edged up 0.2% in January, down from a 0.9% increase the prior month.

On Friday, Commerce reports on January housing starts. The cold weather early in the month likely curtailed new construction, PNC says. And with housing starts falling 8.2% in December — the most in 13 months — economists are looking for a modest rebound. They predict Commerce will announce a 2.8% increase in housing starts in January to a seasonally adjusted annual rate of 1.2 million.