Inflation has remained weak this year, largely because of low oil prices and a strong dollar that makes imports cheap for United States consumers.
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The Consumer Price Index (CPI) measure of inflation has hovered between 0.1% and minus 0.1% for the last eight months, and apart from September last strayed into negative territory in April.
The Labor Department’s gauge of wholesale prices, which includes 75 percent of all USA goods and services, decreased 0.4 percent in October from the prior month as costs fell for food and new-model light trucks.
ONS head of CPI Richard Campbell said: “CPI remained steady at minus 0.1% in October, with stronger clothing price growth being offset by food and alcohol and tobacco, as well as a smaller impact from rising tuition fees”.
Signs of stabilisation in prices after a recent downward spiral are likely to be welcomed by Fed officials and give them a few confidence that inflation will gradually move towards the central bank’s 2 per cent target.
“Core inflation is likewise weak, so savers are unlikely to get an early Christmas present from the Bank of England following its next policy meeting in early December”, he said.
Looking ahead, U.S. CPI data and industrial production, both for October and US house price index for November are slated for release in the NY session.
Despite last month’s acceleration, inflation has been held in check over the past year, causing the Fed to put off a rate hike as it weighed the potential expense to economic growth. Hospital services rose 2% from September, and are up 5.3% since October 2014. Exhibit A for the optimistic view is Markit’s purchasing managers’ index, which increased to a six-month high last month.
CPI has been driven down this year mostly by the collapse in world oil costs but also the effects of the supermarket price war which have resulted in deflation – a sustained period of falling prices – for shoppers at the checkout.
The United Kingdom inflation rate was negative again in October, reported the Office for National Statistics (ONS).
For October, the index for food at home rose 0.1 percent after a 0.3 percent increase in September.
Analysts said the news marked another blow to prospects for a Bank of England interest rate hike any time soon.
The unemployment rate has improved to a healthy 5%, compared with 5.7% a year ago.
How has inflation changed this year?
Punters had a flutter on Paddy Power (LON:PAP), lifting it €1.05 to €113.8, on continued hopes that full-year operating profit would be up on last time following a strong first half.
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Economists at J.P. Morgan said October’s data showed inflation beginning to turn upward. On the downside, as inflation picks up, real pay increases likely will moderate unless nominal wage gains accelerate.
