USA inflation accelerates in December

USA inflation accelerates in December

USA inflation accelerates in December

The strengthening domestic demand was also underscored by other data on Friday showing retail sales increasing at a solid clip in December. Fed policymakers have pencilled in three rate hikes in 2018 following three previous year.

The 0.3 percent seasonally adjusted jump in core inflation was the biggest since an identical increase in January 2017.

The headline rate, which rose at a softer-than-expected 0.1% monthly rate to an annual pace of 2.1%, was held back in December by a 2.7% fall in petrol prices. Over the past six months, core inflation has recorded more benign monthly readings of 0.1 percent or 0.2 percent.

"It supports our view that the Fed will ultimately increase interest rates by a more aggressive 100 basis points cumulatively this year", said Paul Ashworth, chief US economist at Capital Economics in Toronto.

Factors that indicate higher December inflation are increased prices for some foods and the impact of higher pay for government employees.

The dollar fell to a session low against a basket of currencies after the data.

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Prices of medical care rose 0.3 percent, as the index for prescription drugs advanced 1 percent. Owners' equivalent rent of primary residence climbed 0.3 percent after gaining 0.2 percent in November.

Jaikishan J Parmar, research analyst at Angel Broking said that increase in industrial production could be partially attributed to the base effect as November 2016 was the month when production had taken a hit due to note ban. The cost of both hospital and doctor visits increased 0.3 percent. The energy index rose 6.9% in the last twelve months.

Meanwhile, used auto and truck prices jumped 1.4% in the month, while new vehicle prices gained 0.6%. Economists were expecting to see a 0.2% rise in price pressures.

The annual CPI in rural areas in December ruled higher at 5.27 per cent, while in urban India it rose by 5.09 per cent. The unemployment rate is at its lowest level in 17 years, meaning companies should in theory be competing more aggressively for workers.

Last month, gasoline prices fell 2.7 percent after rebounding 7.3 percent in November. Retail sales rose 5.4 percent from a year ago. It increased 1.8 per cent in the 12 months through December, picking up from 1.7 per cent in November. The so-called core PPI increased 0.4 percent in November.

Growth in manufacturing in November was led by strong double-digit growth in "food products", "pharmaceuticals, medicinal chemical and botanical products", and the 'computer, electronic and optical products'.

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