Energy prices bump key US inflation index up in November
US energy prices surged in November, pushing a key inflation measure higher compared to the prior month, but other prices remain sluggish. (AFP/JEWEL SAMAD)
WASHINGTON: Rising prices for energy and other goods nudged a closely-watched measure of US inflation a little higher in November, according to new data published on Friday (Dec 22).The modest uptick could offer comfort to Federal Reserve policymakers who raised the benchmark interest rate this month for the third time in 2017 despite a long streak of weak readings on inflation.But elsewhere in the Commerce Department numbers there were signs inflation pressures remained tame.The Personal Consumption Expenditures price index, the Fed's preferred inflation statistic, gained 0.2 per cent over October, undershooting analyst expectations which called for a 0.3 per cent gain.The important 12-month measure for the index, showed prices were 1.8 higher than November of last year - just shy of the Fed's two percent target but no higher than in March.Energy prices jumped 4.3 per cent last month, more than offsetting the 1.1 per cent dip in October, but food and durable goods prices fell 0.1 per cent and 0.2 per cent, respectively.
Excluding the volatile food and fuel categories, however, November price gains slowed to 0.1 per cent, matching analyst expectations and down from October's 0.2 per cent increase.Year-on-year, the "core" measure rose a tenth of a point to 1.5 per cent, the same as in June.The annual core measure has been below the Fed's two per cent target for nearly six years.US central bankers have written off weak inflation this year as a product of a series of one-off idiosyncratic features - such as sudden dips in prices for mobile phone plans and medications - but cracks have appeared in the confidence in this explanation.
Outgoing Fed Chair Janet Yellen has acknowledged the central bank's understanding of the forces driving inflation is imperfect and structural factors could be behind the tepid price pressures.A minority of members on the Fed's rate-setting committee have argued for forbearance in raising rates, and two voted against raising rates this month.Nevertheless, Fed officials signalled they expect to raise the key lending rate three times in 2018, expecting that a continuing recovery and tightening labor markets will at last produce clear signs the economy is running hot.Also in the November report, the Commerce Department reported that the pace of consumer spending was double that of gains in income, with incomes rising 0.3 per cent, or US$54 billion, but expenditures increasing 0.6 per cent, or US$87.1 billion.The personal savings level of US$426.2 billion was the smallest since August 2008.
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