Rising inflation, retail sales pave way for Fed rate hike
washington — Underlying US consumer prices recorded their largest increase in 11 months in December amid strong gains in the cost of rental accommodation and healthcare, bolstering expectations that inflation will accelerate this year.
The strengthening domestic demand was also underscored by other data on Friday showing retail sales increasing at a solid clip in December. The reports likely keep the Federal Reserve on course to raise interest rates at least three times this year. The US central bank hiked borrowing costs three times in 2017. The Labour Department said its Consumer Price Index excluding the volatile food and energy components rose 0.3 per cent last month also as prices for new motor vehicles, used cars and trucks and motor vehicle insurance increased.
That was the biggest advance in the so-called core CPI since January and followed a 0.1 per cent gain in November. Core CPI increased 1.8 per cent in the 12 months through December, picking up from 1.7 per cent in November.
Economists polled by Reuters had forecast core CPI rising 0.2 per cent month-on-month and holding steady at 1.7 per cent on an annual basis. Weak import and producer price reports this week had raised concerns about the inflation outlook, although the two reports do not have a strong correlation with the CPI data.
Supporting the rise in underlying inflation pressures last month, rents increased 0.4 per cent. Owners’ equivalent rent of primary residence climbed 0.3 per cent after gaining 0.2 per cent in November.
In a separate report on Friday, the Commerce Department said retail sales rose 0.4 per cent last month. Data for November was revised to show sales gaining 0.9 per cent instead of the previously reported 0.8 per cent increase. Retail sales rose 5.4 per cent from a year ago.
Sales last month were supported by a 1.2 per cent jump in receipts at gardening and building material stores. Sales at auto dealerships rose 0.2 per cent. —