CPI inflation steady at 3.2% in August 2019

Andrew Cummings
September 12, 2019

Retail sales and the Consumer Price Index will feature the U.S. calendar on Thursday and Friday respectively at 1230 GMT, though the results may look familiar. "We see scope for more (monetary policy) easing".

On IIP, Devendra Kumar Pant, Chief Economist, India Ratings and Research, said: "July 2019 IIP growth increased to two-month high of 4.3 per cent".

A measure of underlying USA inflation accelerated by more than forecast to a one-year high in August, signaling inflation was already firming ahead of fresh tariffs on Chinese goods this month that may push prices higher for Americans. The CPI gained 0.3 per cent in July.

Economists polled by Reuters had forecast the core CPI rising 0.2 per cent in August and up 2.3 per cent on a year-on-year basis. Nonetheless, the Consumer Price Index (CPI) in August was lower than the corresponding month of the a year ago when retail inflation stood at 3.69 per cent.

Consumer price inflation for the urban areas shot up to 4.49 per cent in August from 4.22 per cent in July 2019.

According to the data furnished by the National Statistical Office (NSO), the Consumer Food Price Index (CFPI) widened to 2.99 per cent in August from an expansion of 2.36 per cent in July 2019 and 0.29 per cent in August 2018.

While the Fed officially targets 2% headline inflation, policy makers look to the core index for a better read on underlying price trends. Financial markets have fully priced in a rate cut at the Fed's September 17-18 policy meeting against the backdrop of simmering US-China trade tensions, which have tipped both US and global manufacturing into recession.

The central bank, which has already reduced the key policy rate four times in the current calendar year, is scheduled to announce its next bi-monthly monetary policy on October 4. Although consumers are still in great shape, with the unemployment rate remaining at 50-year lows and wage growth at decade highs in July, it is believed that without the industrial support, consumer spending, alone, may not be able to sustain economic growth at a healthy pace.

Factory output growth accelerated in July by 4.3 per cent, but it remained lower than the 6.5 per cent achieved during the corresponding month of the previous fiscal.

Prices for a wide array of goods and services rose last month.

Clothing costs, which had posted a big jump in June, edged up a small 0.2% in August.

The cost of health insurance rose by a record 1.9 per cent. This marked the third straight monthly rise of 0.3% and a pickup from earlier in 2019. The cost of new vehicles and household furnishings fell.

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