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Economics Gazette

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November 17, 2019

US consumer prices rose by 2.1% yoy in January 2018

US consumer pricesThe US consumer prices rose by 2.1% yoy in January, keeping their level in December, but the increase was above market expectations for growth of 1.9%. The calming of fuel and electricity prices was offset by higher food and medical services. The monthly inflation rises to 0.5% according to seasonally adjusted data.

An annual rise in energy prices was recorded at a slower rate of 5.5% against 6.9% in December. The gasoline is up 8.5% yoy against 10.7% at the end of last year. The Americans had higher electricity costs (2.4%), transport services (4%), medical services (2%) and food (2%) in January. At the same time, prices were lower for garments, as well as new and used cars.

Excluding food and energy prices, the annual US inflation is 1.8%, which is also above the analysts expectations for 1.7%.

On a monthly basis, the consumer price index rose by 0.5%, compared to growth of 0.2% in December. For comparison, expectations were for 0.3%.

After the announcement, the 10-year US government bond yield rose from 2.82% to 2.87% in just a few minutes. January’s inflation data is from great importance in the markets as recent US employment data literally sharpened stock markets because of fears of the Federal Reserve’s faster-than-expected rise in US interest rates. In this situation, the Fed is likely to meet its interest rate plan in March.

Although the news is disappointing for investors, rising inflation is a good sign of the US economy as the figures reflect wage increases in the country and higher household consumption.

A separate report makes it clear that retail sales in the US unexpectedly fell in January, and December data was revised downwards, indicating that consumer spending was weaker in the first quarter. The retail sales in the United States in January shrank by 0.3% on a monthly basis.

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