December retail inflation grows 5.2 percent

December retail inflation grows 5.2 percent

Andrew Cummings
January 12, 2018

Economists polled by Reuters had forecast core CPI rising 0.2% month-on-month and holding steady at 1.7% on an annual basis.

According to Ministry of Statistics, the measure of consumer price inflation, the CPI index, rose 5.21 per cent in Dec from a year earlier. The December gain was the smallest advance since October.

As per the CSO data, inflation for the food basket increased to 4.96 per cent in December from 4.42 per cent in the preceding month.

"The 0.3% m/m gain in core consumer prices in December will reinforce expectations of a Fed rate hike in March and supports our view that the Fed will ultimately increase interest rates by a more aggressive 100bp cumulatively this year", said Paul Ashworth, chief US economist at Capital Economics. The Fed last year accelerated that pace, raising rates three times and signalling at its meeting last month that it expected to raise rates at the same clip this year.

Households also paid more for new motor vehicles, which rose 0.6% in price last month, the biggest gain since January.

Retail inflation for the month of December 2017 stood at 5.21 percent, up from 4.88 percent in November, while the general index for the month of November 2017 stood at 125.6, which is 8.4 percent higher as compared to the level in the month of November 2016. He said he expected the next rate hike to occur in March with a total of four hikes this year.

Avery Shenfeld, senior economist at CIBC World Markets, said that the USA dollar could see some momentum Friday following CPI data.

"We expect the MPC to see through the jump in housing inflation in December 2017 in the upcoming policy review, which would be presented shortly after the Union Budget", she added.

The energy index in the United States last month fell 1.2% compared to November.

But clothing prices fell for the fourth consecutive month, and airline fares fell 0.5% after a 2.4% drop in November. The government figures show that gas prices are up 6.9 per cent from December 2016.

The cost of medical care increased 0.3%, with prices for prescription medication surging 1.0% after rising 0.6% in November.

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