By Joshua Newell
Washington (MNI) – Consumer price data to be released Friday are
expected to show accelerating inflation for January, after a lack of
movement the past several months.
By some measures energy prices have once again started to rise,
even though energy prices actually fell in Thursday’s PPI report as
residential electricity and natural gas declines offset gasoline’s rise.
Overall the January PPI finished goods index rose just 0.1% while the
core rate jumped 0.4% on higher pharmaceutical and light truck prices.
The Energy Information Administration reported that January
gasoline prices rose for the first time since May, and the BLS reported
that fuel import prices rose 1% in January.
In a telephone interview Wednesday with Ryan Wang, an economist
with HSBC, he told MNI, “the main reason we are likely to see some price
increases is because gasoline prices are starting to head higher.”
Wang pointed to a combination of rising global demand and market
skittishness regarding the Iranian sanctions issue as the main reason
for the price hike.
At the same time, the day’s January PPI report showed muted 0.1%
growth in the headline figure, as finished energy prices unexpectedly
declined 0.5%. This was below economists’ expectations and lowered year
over year growth from 4.8% to 4.1%.
The last part of 2011 also experienced subdued inflation growth.
Headline producer prices showed a decline in December, the second
decline in the last three months, and after the yearly revisions
released Wednesday, CPI was flat two of the previous three months,
pushing the year over year change in the headline number to a ten month
low.
The FOMC expects this trend to continue, stating in the minutes
from their January 24-25 meeting, “members generally anticipated that
inflation over coming quarters would run at or below the 2 percent
level”.
However, according to a survey of economists by Market News
International, consumer prices showed a 0.3% gain in January.
After stripping out the more volatile energy and food prices,
inflation is projected to continue to grow along trend, as core CPI is
forecast to grow 0.2%, after a 0.1% gain last month.
Core PPI increased more than expected by 0.4% for January,
following a 0.3% rise in December.
In its U.S. Daily Economic Notes, Deutsche Bank pointed to an
improving employment picture, saying “Unemployment is clearly trending
downward, and the change in unit labor cost growth has swung decidedly
into positive territory.”
The report also highlighted motor vehicles and pharmaceuticals as
the two sectors are expected to push the core numbers higher.
Ryan Wang expanded on this, citing medical costs as a main reason
for the projected rise: “There are possible upside risks to medical care
costs, as sometime price increases can occur at the beginning of the
year. This isn’t always true, so seasonal adjustment factors struggle to
deal with these changes.”
Michael Englund, chief economist of Action Economics said via phone
interview, “we are seeing some swings in autos prices” and after three
straight monthly declines in the transportation segment of CPI “we could
see an upswing in vehicle prices this month.”
This analysis proved correct according to today’s PPI report.
“About forty percent of the finished core advance can be attributed to
prices for pharmaceutical preparations, which climbed 2.0 percent.
Higher prices for light motor trucks and household appliances also were
factors in the increase of the finished core index.”
The BLS will release the January CPI report on Friday at 8:30 AM
EST.
— Josh Newell is a Washington reporter for Need to Know News
** Market News International Washington Bureau: 202-371-2121 **
[TOPICS: M$U$$$,MAUDS$]
