By Joshua Newell

WASHINGTON (MNI) – Price data to be released Thursday and Friday
are expected to show accelerating inflation for January, after several
months of price stability, as energy prices once again started to
rise.

The Energy Information Administration reported that gasoline prices
have risen for the first time since May, and the BLS reported that fuel
import prices rose 1% in January.

In a telephone interview 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.”

He pointed to a combination of rising global demand and market
skittishness regarding the Iranian sanctions issue as the main reason
for the price hike.

The last part of 2011 had shown muted inflation growth. Following
the yearly revisions for PPI and CPI that were released this week,
headline producer prices showed a decline in December, the second
decline in the last three months.

CPI, meanwhile, was flat last month, pushing the year-over-year
change in the headline number to a 10-month low.

However, according to a survey of economists by Market News
International, headline PPI is expected to increase by 0.4% on a monthly
basis and consumer prices should show a 0.3% gain.

The January ISM manufacturing report showed an 8 point jump in its
prices index, the first price increase in four months.

After stripping out the more volatile energy and food prices,
inflation is projected to continue to grow along trend, as both core PPI
and CPI are forecast to grow 0.2% for the month.

This would follow a 0.3% monthly increase in core PPI and a 0.1%
rise in core CPI for December, pushing both measures of inflation to
their highs for the year.

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.

HSBC’s 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 a
telephone 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.”

The BLS will release the January PPI report on Thursday at 8:30 AM
EST and the 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 **

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