USA inflation rate inches up to 2.2% in February

Joann Johnston
March 14, 2018

Meanwhile, the country's annual retail inflation eased for the second straight month in February to 4.44 percent, as food prices fell, government data showed on Monday. Retail inflation, based on Consumer price index (CPI), was at 5.07 per cent in January.

Strong inflation numbers in January had sparked fears that price pressures were accelerating, leading financial markets to expect a more aggressive pace of interest rate increases from the Federal Reserve than is now anticipated.

Core prices - which exclude the volatile food and energy categories - also climbed 0.2 percent.

Federal Reserve policy, which in recent history has focused on core inflation measured by the core PCE Price Index, will see that the more familiar core CPI is below the PCE target range of 2 percent.

USA consumer prices increased marginally in February amid a decline in gasoline prices and a moderation in the cost of rental accommodation, the latest indication that an anticipated pickup in inflation likely will be only gradual.

Analysts said retail inflation could accelerate to 6 percent by June and may remain at 5 percent to 6 percent in the financial year that begins on April 1, leading to pre-emptive monetary tightening.

The Consumer durables and Consumer non-durables have recorded growth of 8.0percent and 10.5% respectively.

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Within the February numbers, there were signs that price pressures were running hotter than they had been at this point in 2017.

The US non-farm payrolls report showed employment increased by 313,000 in the month of February following an addition of 239,000 jobs in the previous month - upwardly revised from the initial estimate of 200,000 - and much more than consensus expectations for a 205,000 increase.

16 out of the 23 industry groups (asper 2-digit NIC-2008) in the manufacturing sector have shown positive growth during the month of January 2018 as compared to the corresponding month of the previous year. It had increased its inflation projection to 4.3-4.7% in H2FY18 as compared to its earlier projections of 4.2-4.6%.

The mining sector, however, registered negligible growth of 0.1 per cent, as compared to 8.6 per cent rise in January a year ago.

The unemployment rate also remained 4.1 percent for the fourth month as almost a million people flooded into the job market and majority found jobs.

The central bank expects inflation to pick up to 5.1-5.6 percent in April-September and then ease later on anticipation of for normal rainfall. "The government demand picked up post last year's Budget and it is now having an effect on infrastructure and primary goods".

"The broader story remains that of USA monetary policy normalization in the backdrop of an improving economy and a further decline in currency market volatility would only fuel more risk taking appetite", said Commerzbank's FX strategist Thu Lan Nguyen.

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