Published: Thu, April 12, 2018
Markets | By Erika Turner

Wholesale prices show hint of inflation

Wholesale prices show hint of inflation

The core consumer price index, which strips out volatile food and energy prices, rose 2.0 per cent in March, slowing from 2.5 per cent in February.

A key measure of US inflation accelerated to the highest in a year as a drag from mobile-phone costs faded, bearing out the Federal Reserve's forecast for a pickup in price gains.

Machine orders are expected to sink 2.5% on month and be flat on year after climbing 8.2% on month and 2.9% on year in January. The highest price increases in the third month of the year were measured for alcoholic beverages and tobacco as well as food, the stats office remarked.

They argue that this scenario could compel the Fed to increase interest rates three more times this year.

That was in line with the flash data published on March 29. Food prices did go up on a month-on-month basis, particularly seasonal food items (potatoes, fresh vegetables and fruits) (+3.8%), pasta products (+1.7%) and rolls (+1.2%), while the cost of eggs dropped 6.5% and sugar cost 2.8% less for consumers. Food prices rose 0.1% while the cost of other major household expenses such as rent and medical care rose more sharply, as did prices for plane travel and auto insurance. Fed Chairman Jerome Powell said last week that 12-month inflation readings "should move up notably this spring" because of the fading of weakness from a year earlier.

The CPI drop surprised analysts who had predicted a 0.1 per cent increase. That measure-the price index for personal consumption expenditures-shows inflation continues to run below the Fed's target but is not far off.

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But with the labor market tightening, the dollar weakening and the stimulus from a $1.5 trillion income tax cut package and increased government spending still to impact on the economy, economists expect inflation will breach its target sometime this year.

Economists were looking for an annual increase of 3.2%, down from 3.7% in February.

Consumer prices are expected to add 2.6% on year, slowing from 2.9% in February.

A separate report, also released Wednesday by the Labor Department, showed average hourly earnings adjusted for inflation rose 0.4 percent from March 2017.

That's not to say everything was cheaper last month.

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