Retail inflation at 19-month low in January; December industrial growth subdued

Irving Hamilton
February 13, 2019

"Morgan Stanley expects the U.S. core consumer price index (CPI) to rise 0.2 percent in January, in line with its three-month average, but sees the headline CPI falling for the fourth consecutive month to 1.5 percent from 1.9 percent".

Industrial production jumped to 2.4 per cent in December, 2018 from 0.5 per cent in November, 2018 driven mainly by a sharp spike in manufacturing index which rose to 2.7 per cent vs -0.4 per cent month-on-month.

Retail inflation in January is the lowest since June 2017 when it had touched 1.46 per cent. Consumer Food Price Index (CFPI) inflation stood at (-) 2.17 per cent in January as against (-) 2.65 per cent in December.

Last week the BoE said inflation was likely to fall below 2.0 percent in coming months before picking up again.

The data released by the Central Statistics Office further said the inflation in the "fuel and light" category also fell to 2.2 per cent in January this year from 4.54 per cent in December 2018. In its February 7 policy statement, it projected consumer inflation at 3.2-3.4 per cent in the first half of next financial year, beginning April 1.

Inflation pressures have eased in recent months, following falls in food and crude oil prices.

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Prime Minister Narendra Modi, who faces tough general elections by May, has announced an annual transfer of 750 billion rupees ($11 billion) to millions of farmers, and tax benefits for the middle class, which many economists say could spur both consumer spending and inflation. This, combined with a negative base effect, may lead to a four-tick decline of the year-on-year rate to 1.5%.

The biggest ever monthly fall in gas prices since comparable records began in 1988 coincided with the start of energy regulator Ofgem's cap on household bills.

January inflation missed economists' expectations and the central bank's target of 2 per cent. Prices of health related goods increased 8.93% while education related goods rose by 7.99%.

A Reuters poll of 30 economists had predicted CPI to have accelerated to 2.48 per cent in January.

"US CPI for January is due out this afternoon".

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