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IMF projects Venezuela inflation will hit 1,000,000 percent in 2018

A worker counts Venezuelan bolivar notes at a parking lot in Caracas, Venezuela May 29, 2018. REUTERS/Marco Bell

(Reuters) – Venezuela’s inflation rate is likely to top 1,000,000 percent in 2018, an International Monetary Fund official wrote on Monday, putting it on track to become one of the worst hyperinflationary crises in modern history.

The South American nation’s economy has been steadily collapsing since the crash of oil prices in 2014 left it unable to maintain a socialist system of subsidies and price controls.

“We are projecting a surge in inflation to 1,000,000 percent by end-2018 to signal that the situation in Venezuela is similar to that in Germany in 1923 or Zimbabwe in the late 2000’s,” Alejandro Werner, director of the IMF Western Hemisphere department, wrote in a post on the agency’s blog.

Venezuela’s Information Ministry did not immediately reply to a request for comment.

Consumer prices have risen 46,305 percent this year, according to the opposition-run legislature, which began publishing its own inflation data in 2017 because the nation’s central bank had halted the release of basic economic data.

President Nicolas Maduro says the country is victim of an “economic war” waged by opposition businesses with the support of Washington.

His government routinely dismisses the IMF as a pawn of Washington that puts the interests of wealthy financiers before those of developing nations.

Opposition critics have said Venezuela’s problems are the result of bad policy decisions, including unchecked expansion of the money supply and currency controls that leave businesses unable to import raw materials and machine parts.

(Reporting by Brian Ellsworth; Editing by Bill Berkrot)

U.S. consumer prices edge up; retail sales unexpectedly increase

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer prices barely rose in October as the boost to gasoline prices from hurricane-related disruptions to Gulf Coast oil refineries was unwound, but rising rents and healthcare costs pointed to a gradual buildup of underlying inflation.

Low inflation is, however, helping to underpin consumer spending. Other data on Wednesday showed an unexpected increase in retail sales last month as heavy price discounting by automobile manufacturers lifted purchases of motor vehicles.

Rising retail sales and steadily firming underlying price pressures likely will keep the Federal Reserve on course to raise interest rates next month.

The Labor Department said its Consumer Price Index edged up 0.1 percent last month after jumping 0.5 percent in September. That lowered the year-on-year increase in the CPI to 2.0 percent from 2.2 percent in September. The increases were in line with economists’ expectations.

Gasoline prices fell 2.4 percent after surging 13.1 percent in September, which was the largest gain since June 2009. September’s jump in gasoline prices followed Hurricane Harvey, which struck Texas in late August and disrupted production at oil refineries in the Gulf Coast region.

Food prices were unchanged after nudging up 0.1 percent in September. Excluding the volatile food and energy components, consumer prices rose 0.2 percent in October amid a pickup in the cost of rental accommodation, healthcare costs, tobacco and a range of other goods and services.

The so-called core CPI gained 0.1 percent in September. October’s increase lifted the year-on-year increase in the core CPI to 1.8 percent. The year-on-year core CPI had increased by 1.7 percent for five straight months.

The slight pickup in the monthly core CPI could offer some comfort to Fed officials amid concerns that stubbornly low inflation might reflect not only temporary factors but developments that could prove more persistent.

The Fed’s preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, has consistently undershot the U.S. central bank’s 2 percent target for more than five years. The Fed has lifted borrowing costs twice this year and has projected three rate increases in 2018.

Prices of U.S. Treasuries fell and the U.S. dollar <.DXY> pared losses against a basket of currencies after the data. U.S. stock index futures extended losses.

RENTS, HEALTHCARE COSTS RISE

Last month, owners’ equivalent rent of primary residence climbed 0.3 percent, quickening after September’s 0.2 percent increase. The cost of hospital services increased 0.5 percent and prices for doctor visits rose 0.2 percent. There were also increases in prices for wireless phone services, airline fares, education and motor vehicle insurance.

Prices for used cars and trucks rose 0.7 percent, ending nine straight months of declines. New motor vehicle prices, however, fell for a second consecutive month as manufacturers resorted to deep discounting to eliminate an inventory overhang.

In a separate report on Wednesday, the Commerce Department said retail sales increased 0.2 percent last month. Data for September was revised to show sales jumping 1.9 percent, which was the largest gain since March 2015, rather than the previously reported 1.6 percent advance.

Retail sales increased 4.6 percent on an annual basis.

Economists polled by Reuters had forecast that retail sales would be unchanged in October. The slowdown in retail sales last month from September’s robust pace largely reflected an unwinding of the boost to building materials and gasoline prices after recent hurricanes.

Receipts at auto dealerships increased 0.7 percent after soaring 4.6 percent in September, supported by the deep price discounting by manufacturers. Sales at gardening and building material stores fell 1.2 percent last month after surging 3.0 percent in September.

Receipts at service stations decreased 1.2 percent in October. That followed a 6.4 percent gain in September. Excluding automobiles, gasoline, building materials and food services, retail sales increased 0.3 percent last month after climbing 0.5 percent in September.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. Last month’s increase in core retail sales indicated a healthy pace of consumer spending at the start of the fourth quarter.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 2.4 percent annualized rate in the third quarter.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

U.S. retail sales rise broadly; consumer prices rebound

FILE PHOTO - A employee walks by a meat cooler in the grocery section of a Sam's Club during a media tour in Bentonville, Arkansas, U.S. on June 5, 2014. REUTERS/Rick Wilking/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. retail sales increased broadly in April while consumer prices rebounded, pointing to a pickup in economic growth and a gradual rise in inflation that could keep the Federal Reserve on track to raise interest rates next month.

The reports on Friday added to labor market data in suggesting the near stall in economic activity in the first quarter was an anomaly. But a moderation in year-on-year inflation led financial markets to dial down expectations of at least two more rate increases this year.

“The economy picked it up a notch from the slow start earlier this year, but the inflation fires are not burning brightly and this will likely keep the Fed on just a gradual pace for interest rate hikes later this year,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.

The Commerce Department said retail sales rose 0.4 percent last month after an upwardly revised 0.1 percent gain in March. Sales rose 4.5 percent in April on a year-on-year basis.

Economists had forecast overall retail sales increasing 0.6 percent last month. Excluding automobiles, gasoline, building materials and food services, retail sales gained 0.2 percent after advancing 0.7 percent in March.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

The economy grew at a 0.7 percent annualized rate in the first quarter, held back by the weakest increase in consumer spending in more than seven years. The Atlanta Fed estimates GDP will rise at a 3.6 percent pace in the second quarter.

In a separate report on Friday, the Labor Department said its Consumer Price Index rose 0.2 percent after dropping 0.3 percent in March. The rise in prices suggested that March’s decline, which was the first in 13 months, was an aberration.

In the 12 months through April, the CPI increased 2.2 percent. While that was a slowdown from March’s 2.4 percent increase, it still exceeded the 1.7 percent average annual increase over the past 10 years.

Financial markets are pricing in more than a 70 percent chance of a rate hike at the Fed’s June 13-14 policy meeting, according to CME Group’s FedWatch program. But the likelihood the U.S. central bank will raise rates twice before the end of the year fell after Friday’s data.

The Fed lifted its benchmark overnight interest rate by 25 basis points in March and has forecast two more hikes this year.

Prices of U.S. Treasuries rose and the U.S. dollar <.DXY> weakened against a basket of currencies after the release of Friday’s data. U.S. stocks were trading mostly lower, pulled down by weak financial and industrial sectors.

‘COMPETITIVE PRESSURES’

Gasoline prices jumped 1.2 percent in April after falling 6.2 percent in March. Food prices rose 0.2 percent as prices for fresh vegetables recorded their biggest increase since February 2011.

The so-called core CPI, which strips out food and energy costs, edged up 0.1 percent last month, reversing March’s 0.1 percent dip. The monthly core CPI was restrained by declines in the prices of wireless phone services, medical care, motor vehicles and apparel.

Rental costs increased 0.3 percent after a similar gain in March. The core CPI increased 1.9 percent on a year-on-year basis, the smallest gain since October 2015, after rising 2.0 percent in March. Still, April’s increase was above the 1.8 percent average annual increase over the past decade.

“To some extent, this new weakness in price inflation is due to competitive pressures rather than weak demand, so the Fed can afford to discount it,” said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

Consumer spending is being supported by a tightening labor market, marked by an unemployment rate at a 10-year low of 4.4 percent. A third report on Friday showed consumer sentiment rose in early May as the outlook for wages improved.

Motor vehicle sales increased 0.7 percent in April after three straight months of decreases.

There were hefty gains in sales at building material and electronics and appliance stores.

But sales at clothing stores fell 0.5 percent. Department store retailers have been hurt by declining traffic in shopping malls and increased competition from online retailers, led by Amazon.com <AMZN.O>.

Retailer J.C. Penney Co Inc <JCP.N> said on Friday its net loss widened to $180 million, or 58 cents per share, in the first quarter. On Thursday, Macy’s Inc <M.N> reported a 4.6 percent drop in first-quarter sales.

Sales at online retailers jumped 1.4 percent in April.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Consumer prices post largest gain in nearly four years

WASHINGTON, Feb 15 (Reuters) – U.S. consumer prices recorded their biggest increase in nearly four years in January as households paid more for gasoline and other goods, suggesting inflation pressures could be picking up.

The Labor Department said on Wednesday its Consumer Price Index jumped 0.6 percent last month after gaining 0.3 percent in December. January’s increase in the CPI was the largest since February 2013.

In the 12 months through January, the CPI increased 2.5 percent, the biggest year-on-year gain since March 2012.

The CPI rose 2.1 percent in the year to December.

Economists polled by Reuters had forecast the CPI rising 0.3 percent last month and advancing 2.4 percent from a year ago.

Inflation is trending higher as prices for energy goods and other commodities rebound as global demand picks up.

The so-called core CPI, which strips out food and energy costs, rose 0.3 percent last month after increasing 0.2 percent in December. That lifted the year-on-year core CPI increase to 2.3 percent in January from December’s 2.2 percent increase.

The Fed has a 2 percent inflation target and tracks an inflation measure which is currently at 1.7 percent.

Gradually firming inflation and a tightening labor market could allow the Fed to raise interest rates at least twice this year.

Fed Chair Janet Yellen told lawmakers on Tuesday that “waiting too long to remove accommodation would be unwise.”

The U.S. central bank has forecast three rate increases this year. The Fed hiked its overnight interest rate last December by 25 basis points to a range of 0.50 percent to 0.75 percent.

Last month, gasoline prices surged 7.8 percent, accounting for nearly half of the rise in the CPI. That followed a 2.4 percent increase in December.

Food prices edged up 0.1 percent after being unchanged for six straight months.

The cost of food consumed at home was unchanged after dropping for eight consecutive months.

Within the core CPI basket, rents increased 0.3 percent last month after a similar gain in December.

Owners’ equivalent rent of primary residence gained 0.2 percent in January after increasing 0.3 percent the prior month.

The cost of medical care rose 0.2 percent, with the prices for hospital services and prescription medicine both increasing 0.3 percent. Motor vehicle prices shot up 0.9 percent, the largest rise since November 2009.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

((Lucia.Mutikani@thomsonreuters.com; 1 202 898 8315; Reuters

Messaging: lucia.mutikani.thomsonreuters.com@reuters.net))

Rising rents, healthcare costs boost consumer prices

A nurse prepares a bag of saline at Intermountain Healthcare's Utah Valley Regional Medical Center in Provo, Utah

y Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer prices increased more than expected in August as rising rents and healthcare costs offset a drop in gasoline prices, pointing to a steady build-up of inflation that could allow the Federal Reserve to raise interest rates this year.

The Labor Department said on Friday its Consumer Price Index rose 0.2 percent last month after being unchanged in July. In the 12 months through August, the CPI increased 1.1 percent after advancing 0.8 percent in July.

The so-called core CPI, which strips out food and energy costs, rose 0.3 percent last month, the biggest increase since February, after gaining 0.1 percent in July.

Economists had forecast the CPI nudging up 0.1 percent last month and the core CPI gaining 0.2 percent. The core CPI increased 2.3 percent in the 12 months through August after rising 2.2 percent in the year through July.

U.S. Treasury prices pared gains and U.S. stock futures extended losses after the data. The dollar was stronger against a basket of currencies.

Last month’s uptick in inflation is likely to be welcomed by Fed officials when they meet next Tuesday and Wednesday to deliberate on monetary policy.

But against the backdrop of a raft of disappointing economic reports for August, including weak retail sales and industrial production, as well as a slowdown in job growth, the U.S. central bank is expected to leave interest rates unchanged.

The Fed has a 2 percent inflation target and tracks an inflation measure which has been stuck at 1.6 percent since March. Fed Governor Lael Brainard said on Monday she wanted to see stronger consumer spending data and signs of rising inflation before hiking rates.

The U.S. central bank raised its benchmark overnight interest rate at the end of last year for the first time in nearly a decade, but has held it steady since amid concerns over persistently low inflation.

Financial markets have virtually priced out a rate increase next week and many economists expect the Fed to raise borrowing costs in December.

In August, gasoline prices fell 0.9 percent after sliding 4.7 percent in July. Food prices were unchanged, with the cost of food consumed at home declining for a fourth straight month.

Within the core CPI basket, housing and medical costs continued their upward march. Owners’ equivalent rent of primary residence rose 0.3 percent in August. It has risen by the same margin every month since April.

Medical care costs jumped 1.0 percent last month, the largest increase since February 1984, after advancing 0.5 percent in July. The cost of hospital services surged 1.7 percent, the biggest gain since October 2015. Prices for prescription medicine soared 1.3 percent.

Americans also paid more for motor vehicle insurance and apparel. Prices for tobacco also rose, but the cost of used cars and trucks fell for a sixth straight month.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

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