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Annual core CPI in August rose to 2.4% vs. 2.3% expected

12 September 2019

Other data on Thursday showed the number of Americans filing applications for unemployment benefits dropped to a five-month low last week suggesting the labor market remains healthy, which should continue to underpin consumer spending even as hiring has cooled. The Trump administration's year-long trade war with China, which has sapped business confidence, is threatening to derail the longest economic expansion in history. Fed Chair Jerome Powell reiterated last week that the United States central bank would continue to act "as appropriate" to keep the expansion, now in its 11th year, on track. "We see scope for more (monetary policy) easing".

"Concerns about too-low inflation appear misguided", said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.

The sub-category of food and beverages recorded a 2.96 per cent rise in last month over August 2018. It has projected retain inflation at 3.1 per cent in second quarter and 3.5-3.7 per cent in the second half of the ongoing financial year.

Investors will also be reviewing the August CPI numbers on Thursday to clarify whether consumption is still inflation supportive and the results may be more encouraging than those from retail sales. Rent and medical prices were among the drivers behind stronger inflation in August.

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According to the monthly data published by the US Bureau of Labor Statistics, inflation in August, as measured by the Consumer Price Index (CPI) ticked down to 1.7% from 1.8% on a yearly basis.

Another round of high-level trade talks between Washington and Beijing has been arranged and the spotlight now turns back to data releases as markets are trying to figure out whether there is a need for a sharper rate cut, ahead of the Federal Market Open Committee's policy meeting next week. The Fed lowered borrowing costs in July for the first time since 2008.

In another report on Thursday, the Labor Department said initial claims for state unemployment benefits declined 15,000 to a seasonally adjusted 204,000 for the week ended September 7, the lowest level since April.

In August, gasoline prices fell 3.5 per cent after rebounding 2.5 per cent in July. Clothing costs, which had posted a big jump in June, edged up 0.2% in August.

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Food costs were unchanged for the third straight month and up a small 1.7% from a year ago.

The retail inflation in health was 7.84 per cent, recreation and amusement 5.54 per cent and personal care and effects 6.38 per cent. Wholesale food prices fell 0.6% in August after gaining 0.2% in the prior month.

Accordingly, the prices of pulses and its products increased by 6.94 per cent, vegetables by 6.90 per cent and meat and fish by 8.51 per cent.

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Annual core CPI in August rose to 2.4% vs. 2.3% expected