US consumer price inflation disappoints

Oliver Haill WebFG News | 13 Oct, 2017 14:08 - Updated: 14:08 | | |

cbpetroleogasolina

US headline inflation increased less than expected last month but core prices jumped well above forecasts, according to data released by the Bureau of Labor Statistics on Friday.

September's consumer price index rose 0.5% month-on-month, short of the 0.6% expected but up on the 0.4% increase a month earlier and the largest gain in eight months.

Compared to a year earlier, US CPI accelerated to 2.2% from 1.9% a month earlier but again shy of the 2.3% consensus estimate.

Core prices, which exclude food and energy and are more closely watched by economists and the Federal Reserve, rose by a disappointing 0.1% on the month, short of August's 0.2% increase that was predicted to repeat for a second month.

On the year, core CPI increased 1.7% for the fifth consecutive month, missing the 1.8% consensus forecast.

The gasoline index increased 13.1% in September, the Bureau said, which accounted for about three-quarters of the seasonally adjusted increase as was likely to have been boosted by the impact of Hurricane Harvey.

Other major energy component indexes were mixed, and the food index rose slightly.

The dollar, which was yoyoing against the pound all morning, fell again to 1.3320 on the news to extend losses on the day to 0.44%, while spiking down on the euro 0.3% to 1.1866.

A majority of Fed rate setters believe inflation will trend higher in the coming months due to labour market tightness and the improving global economy, with a December rate hike seen by the market before the data print as virtually nailed on.

"Just when Janet Yellen had one finger on the trigger to raise rates in December, weaker inflation figures have reared their ugly head once again," said Alex Lydall, head of dealing at Foenix Partners.

"Time after time in recent FOMC meetings, members have cited inflation trajectory as the stand-out concern, and today has reinforced their predictions.

"With growth and the domestic economy booming, wages recently increasing, Fed officials appeared hawkish running into year-end, and understandably so. This slip in Inflation will likely fuel the Dovish members, but in the grand scheme will unlikely de-rail rate decisions – perhaps a mere speed bump in the road to economic recovery."

The lower monthly core CPI partly reflected a drop back in vehicle and drug prices that are unlikely to be sustained in the months ahead, said Michael Pearce at Capital Economics, so the September CPI report "is unlikely to stop the Fed hiking rates again in December".

More news

18:12 Broker tips: Lloyds, Barclays, Entertainment One

Goldman Sachs reiterated its 'sell' recommendation on shares of Lloyds and Barclays, placing both stocks on its list of 'UK Sell Ideas' for 2018.

18:07 Results round-up

Industrial equipment rental firm Ashtead said half year earnings were boosted by clean-up efforts after hurricanes Harvey, Irma and Maria and the weak pound as it posted a 16% rise in pre-tax profits to £493.1m.

18:02 Europe close: Technology and M&A power gains in shares

Stocks on the Continent gained ground on Tuesday paced by Technology issues, even as traders waited on the US central bank's policy announcement the next day.

17:53 London close: Forties failure lifts FTSE as inflation spikes

London stocks extended their gains on Tuesday as supply disruptions boosted the energy sector and investors mulled higher than expected UK inflation figures.

17:33 US open: Boeing, 3M push Dow Industrials to fresh record-high

Wall Street's main indices are again heading higher on Tuesday as the Federal Reserve kicks off its two-day rate-setting meeting and several positive updates from corporate heavyweights such as Boeing and 3M.

17:34 EasyJet acquisition of Air Berlin assets approved by European Commission

UK budget airline easyJet cleared a major regulatory hurdle on Tuesday as its proposed acquisition of airport slots and aircraft from Air Berlin was approved by the European Commission.

17:49 Facebook to overhaul its tax structure worldwide

Facebook will move its global tax and revenue base from Ireland and begin booking advertising locally in every country where it operates.

16:51 GSK given green light for Churg-Strauss syndrome treatment

GlaxoSmithKline has been given approval by the US drug regulator for a first targeted treatment for eosinophilic granulomatosis with polyangiitis (EGPA), previously known as Churg-Strauss syndrome.

16:44 Trump accuses Democrats of plot after sexual harassment claims

US President Donald Trump has claimed Democrats are behind a series of sexual harassment claims made against him this week.

16:41 Trump vows to send American astronauts to the moon

Donald Trump, the President of the United states signed the Space Policy Directive 1 to send astronauts to the moon again and to Mars for the first time in history.