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U.S. retail sales beat expectations in January

WASHINGTON, Feb 15 (Reuters) – U.S. retail sales rose more than expected in January as households bought electronics and a range of other goods, pointing to sustained domestic demand that should bolster economic growth in the first quarter.

The Commerce Department said on Wednesday retail sales increased 0.4 percent last month. December’s retail sales were revised up to show a 1.0 percent rise instead of the previously reported 0.6 percent advance.

Last month’s fairly upbeat sales came despite motor vehicle purchases recording their biggest drop in 10 months.

Compared to January last year retail sales were up 5.6 percent.

Excluding automobiles, gasoline, building materials and food services, retail sales increased 0.4 percent after an upwardly revised 0.4 percent gain in December.

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

Economists polled by Reuters had forecast retail sales ticking up 0.1 percent and core sales gaining 0.3 percent last month.

January’s fairly solid retail sales supported views that economic growth will accelerate in the first quarter.

The economy grew at a 1.9 percent annualized rate in the fourth quarter.

Consumer spending is being supported by a tightening labor market, which is gradually boosting wage growth.

That in turn is underpinning economic growth, paving the way for at least two interest rate increases from the Federal Reserve 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, sales at electronics and appliances stores jumped 1.6 percent, the biggest rise since June 2015, after falling 1.1 percent in December.

Receipts at building material stores increased 0.3 percent.

Sales at clothing stores jumped 1.0 percent, the largest rise in nearly a year.

Department store sales climbed 1.2 percent, the biggest increase since December 2015.

Department store sales have been undercut by online retailers, led by Amazon.com <AMZN.O>.

That has led to some retailers, including Macy’s <M.N>, Sears <SHLD.O> and Abercrombie & Fitch <ANF.N> announcing shop closures.

Sales at online retailers were unchanged last month after soaring 1.9 percent in December.

Receipts at restaurants and bars rose 1.4 percent, while sales at sporting goods and hobby stores shot up 1.8 percent.

Receipts at auto dealerships, however, fell 1.4 percent after vaulting 3.2 percent in December.

Last month’s drop was the biggest since March 2016.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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

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

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))

Higher energy prices boost producer inflation

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. producer prices rose more than expected in January, recording their largest gain in more than four years amid increases in the cost of energy products and some services, but a strong dollar continued to keep underlying inflation tame.

The Labor Department said on Tuesday its producer price index for final demand jumped 0.6 percent last month. That was the largest increase since September 2012 and followed a 0.2 percent rise in December.

Despite the surge, the PPI only increased 1.6 percent in the 12 months through January. That followed a similar gain in the 12 months through December. Economists polled by Reuters had forecast the PPI rising 0.3 percent last month and the year-on-year increase moderating to 1.5 percent.

The U.S. dollar pared losses against a basket of currencies after the data. Prices of U.S. Treasuries were mixed while U.S. stock index futures were largely flat.

The rise in producer prices comes as manufacturers report paying more for raw materials. The Institute for Supply Management’s (ISM) prices index surged in January to its highest level since May 2011. The ISM index, which is closely correlated to the PPI, has increased for 11 straight months.

The gains in PPI last month largely reflected increases in the prices of commodities such as crude oil, which are being boosted by a steadily growing global economy. Oil prices have risen above $50 per barrel.

But with the dollar strengthening further against the currencies of the United States’ main trading partners and wage growth still sluggish, the spillover to consumer inflation from rising commodity prices is likely to be limited.

A government report on Friday showed import prices excluding fuels fell in January for a third straight month. Data on Wednesday is expected to show the consumer price index increased 0.3 percent in January after a similar gain in December, according to a Reuters survey of economists.

Last month, prices for final demand goods increased 1.0 percent, the largest rise since May 2015. The gain accounted for more than 60 percent of the increase in the PPI. Prices for final demand goods advanced 0.6 percent in December.

Wholesale food prices were unchanged last month after climbing 0.5 percent in December. Healthcare costs rose 0.2 percent. Those costs feed into the Fed’s preferred inflation measure, the core personal consumption expenditures (PCE) index.

The volatile trade services component, which measures changes in margins received by wholesalers and retailers, shot up 0.9 percent in January after being unchanged in the prior month.

A key gauge of underlying producer price pressures that excludes food, energy and trade services rose 0.2 percent. That followed a 0.1 percent gain in December. The so-called core PPI increased 1.6 percent in the 12 months through January, slowing from December’s 1.7 percent gain.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

European stocks fall, investors seek safety after Trump address

People walk through lobby of London Stock Exchange

By Abhinav Ramnarayan

LONDON (Reuters) – European stocks and bond yields edged lower on Monday and the dollar briefly hit a six-week low after U.S. President Donald Trump began his term in office with a protectionist speech that drove a nervous market into safe-haven assets.

Wall Street was set to open slightly lower, tracking stock markets in Europe and parts of Asia, having hit multi-year highs earlier this month on expectations Trump would boost growth and inflation with extraordinary fiscal spending measures.

However, his inaugural address on Friday, signaling an isolationist stance on trade and other issues, led investors to retreat to the safety of higher-rated government bonds.

Trump also made it clear that he plans to hold talks with the leaders of Canada and Mexico to begin renegotiating the North American Free Trade Agreement.

U.S. stock futures were down 0.2 percent, pointing to a lower open after European stocks touched their lowest levels this year in early trades. By midday, the broad STOXX index had come off the day’s lows but was still down 0.3 percent.

Earlier, Japan’s Nikkei dropped 1.1 percent while shares in Australia fell 0.8 percent after Trump’s administration also declared its intention to withdraw from the Trans-Pacific Partnership (TPP), a 12-nation trade pact that Japan and Australia have both signed.

Other Asian shares were more resilient, however, in part due to dollar weakness, and MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3 percent.

“The focus this morning is on the protectionist rhetoric and the lack of detail on economic stimulus, so it’s a nervous start (to the presidency),” said Investec economist Victoria Clarke.

“The other concern is how the Fed interprets Trump’s stance, the worry being the less he does on fiscal stimulus the more nervous they may get on pushing the rate hikes through.”

The U.S. Federal Reserve, which has indicated it expects to raise its benchmark interest rate three times this year, is due to hold its next meeting on Jan. 31 and Feb. 1.

Rabobank analyst Michael Avery said a more protectionist United States could lead to a U.S. dollar liquidity squeeze, with Mexico and Asia likely the most badly hit.

“We would see outright confusion over what currency to invoice, trade, and borrow in: a 19th century world of competing reserve currencies in different geographic zones, but without the underpinning of gold,” Avery said in a note.

The problem would be exacerbated if China tightens capital controls further, he said.

The U.S. dollar was down 0.4 percent against a basket of six major currencies.

The nervous start on Monday saw safe-haven assets in demand.

The yield on Germany’s 10-year government bond, the benchmark for the region, led most euro zone bonds lower and was down 2 basis points to 0.34 percent.

This followed 10-year U.S. Treasuries yields, which fell to 2.43 percent, after having risen briefly on Friday to 2.513 percent, their highest since Jan. 3.

Spot gold prices, meanwhile, rose on Monday to their highest in two months.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets

(Additional reporting by Hideyuki Sano in Tokyo; Editing by Mark Heinrich)

Higher gasoline, rental costs boost U.S. consumer inflation

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer prices rose in December as households paid more for gasoline and rental accommodation, leading to the largest year-on-year increase in 2-1/2 years and signaling that inflation pressures could be building.

The Labor Department said on Wednesday its Consumer Price Index rose 0.3 percent last month after gaining 0.2 percent in November. In the 12 months through December, the CPI increased 2.1 percent, the biggest year-on-year gain since June 2014. The CPI rose 1.7 percent in the year to November.

The increases were in line with economists’ expectations. The CPI rose 2.1 percent in 2016, up from a gain of 0.7 percent in 2015.

U.S. Treasury prices fell and the dollar strengthened against the euro and yen after the data. U.S. stock index futures were trading higher.

Rising inflation comes against the backdrop of a strengthening economy and tightening labor market, which raises the specter of a faster pace of interest rate increases from the Federal Reserve than currently anticipated.

The U.S. central bank has forecast three rate hikes this year. It raised its benchmark overnight interest rate by 25 basis points to a range of 0.50 percent to 0.75 percent last month.

Price pressures are likely to remain on an upward trend amid expectations of fiscal stimulus from the incoming Trump administration. Republican businessman-turned-politician Donald Trump, who will be sworn in as U.S. president on Friday, has pledged to increase spending on infrastructure and cut taxes.

The so-called core CPI, which strips out food and energy costs, rose 0.2 percent last month after the same increase in November. As a result, the core CPI increased 2.2 percent in the 12 months through December, from 2.1 percent in November.

The Fed has a 2 percent inflation target and tracks an inflation measure which is currently at 1.6 percent.

Last month, gasoline prices jumped 3.0 percent after climbing 2.7 percent in November. Food prices were unchanged for a sixth straight month. The cost of food consumed at home dropped for an eighth consecutive month.

Within the core CPI basket, housing continued its upward march in December. Rents increased 0.3 percent last month, with owners’ equivalent rent of primary residence also rising 0.3 percent. Rents increased 4.0 percent in 2016.

The cost of medical care rose 0.2 percent last month, with the prices for doctor visits unchanged. Prices for prescription medicine increased 0.2 percent. The cost of hospital services rose 0.3 percent.

There were price increases for a range of other goods and services last month including motor vehicle insurance, which increased 0.8 percent. The cost of airline fares rose 1.9 percent in December after falling 1.3 percent in November.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Fed’s Evans says not yet confident U.S. inflation headed higher

Chicago Federal Reserve Bank President Charles Evans takes a question during a round table with the media in Shanghai,

NEW YORK (Reuters) – While the Federal Reserve’s preferred inflation target is close to a 2-percent goal, an outspoken Fed dove said on Tuesday he would “feel better” about raising U.S. interest rates if he were more confident it would continue to rise.

Inflation stuck below the goal is “one of the larger risks” facing the U.S. central bank, Chicago Fed President Charles Evans said at the Council on Foreign Relations. He added it was critical to at least hit the target to convince the public that 2 percent is not a ceiling.

(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)

Rising gasoline, rents push U.S. inflation higher in September

A Shell gas station is shown in Encinitas, California

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer prices recorded their biggest gain in five months in September as the cost of gasoline and rents surged, pointing to a steady pickup of inflation that could keep the Federal Reserve on track to raise interest rates in December.

The Labor Department said on Tuesday its Consumer Price Index increased 0.3 percent last month after rising 0.2 percent in August. In the 12 months through September, the CPI accelerated 1.5 percent, the biggest year-on-year increase since October 2014. The CPI rose 1.1 percent in the year to August.

“The upward creep of prices weakens any argument against a rate increase in December,” said Anthony Karydakis, chief economic strategist at Miller Tabak in New York. “The economy is close to full employment and prices are starting to respond to that reality.”

Last month’s increase in the CPI was in line with economists’ expectations. However, underlying inflation moderated amid a slowdown in the pace of increases in healthcare costs after recent robust gains.

The so-called core CPI, which strips out food and energy costs, gained 0.1 percent last month after climbing 0.3 percent in August. That slowed the year-on-year increase in the core CPI to 2.2 percent following a 2.3 percent rise in August.

But with rents, which account for a larger share of the core CPI, recording their biggest increase in nearly 10 years, and wages pushing higher, economists cautioned against putting too much emphasis on last month’s weak reading.

The U.S. central bank has a 2 percent inflation target and tracks an inflation measure which is at 1.7 percent. Fed Vice Chair Stanley Fischer said on Monday that the U.S. central bank was “very close” to its inflation and employment targets.

“As inflation approaches 2 percent, the argument that the economy has more room to run becomes harder to make and we believe the Fed remains on track for a rate hike in December,” said John Ryding, chief economist at RDQ Economics in New York.

The Fed lifted its short-term interest rate last December and has held it steady since because of persistently low inflation.

The dollar was little changed against a basket of currencies, while prices for longer-dated U.S. Treasuries rose slightly. U.S. stocks rallied, cheered by better-than-expected quarterly earnings from UnitedHealth, Netflix and Goldman Sachs.

FIRMING DEMAND

While the jump in overall inflation was also the result of last year’s lower energy prices dropping out of the calculation, it suggested firming domestic demand.

A 5.8 percent jump in gasoline prices accounted for more than half of the increase in the CPI last month. Americans also paid more for electricity, with prices posting their biggest gain since December 2014.

The price increases are bad news for retirees, with social security recipients only due to get a 0.3 percent cost of living adjustment increase next year. Households, however, got some relief from food prices in September, which were unchanged for a third straight month. The cost of food consumed at home declined for a fifth straight month.

Within the core CPI basket, housing costs rose further in September. Owners’ equivalent rent of primary residence increased 0.4 percent, the largest gain since October 2006, after rising 0.3 percent in August. Rents tend to be sticky and should keep core inflation supported.

Medical care costs rose 0.2 percent last month, the smallest increase since March, after surging 1.0 percent in August. The cost of hospital services was unchanged, while prices for prescription medicine rose 0.8 percent.

The government revised prices for prescription drugs from May through August this year as incorrect data had been used to calculate price changes. Prescription medicine accounts for about 1.4 percent of the CPI basket.

Consumers also paid more for grooming, motor vehicle insurance, tobacco and airline fares. However, prices for communication recorded their largest decline in two years, while heavy discounting by retailers pushed apparel prices down 0.7 percent. Prices for motor vehicles also fell.

“Inflation is moving up, showing this is not an economy that is undergoing serious demand-based weakness,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Drop in U.S. consumer spending clouds Fed rate hike outlook

By Jason Lange

WASHINGTON (Reuters) – U.S. consumer spending fell in August for the first time in seven months while inflation showed signs of accelerating, mixed signals that could keep the Federal Reserve cautious about raising interest rates.

The Commerce Department said on Friday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, fell 0.1 percent last month after accounting for inflation.

Analysts polled by Reuters had expected a 0.1 percent gain.

“Consumers took a breather in August,” said Chris Christopher of IHS Global Insight.

Fed Chair Janet Yellen said last week she expected the U.S. central bank would raise rates once later this year to keep the economy from eventually overheating.

Prices for fed funds futures suggest investors see almost no chance of a hike at the Fed’s next policy meeting in early November and roughly even odds of an increase at its mid-December meeting, according to CME Group.

The dollar <.DXY> was little changed against a basket of currencies while U.S. stock prices were trading higher.

Consumer spending, which has been robust in recent months, partially offset the drag from weak business investment and falling inventories in the second quarter when the economy expanded at a lackluster 1.4 percent annual rate.

Economists said overall economic growth could still accelerate in the current quarter even with August’s slight decline in consumer spending.

The Atlanta Fed said growth appeared on track to accelerate to a 2.4 percent annual rate in the third quarter, according to its closely watched GDPNow forecasting model. It had forecast growth of 2.8 percent for the period earlier this week.

A tightening labor market appears to be pushing up wages and could fuel higher levels of spending in the future. Personal income rose 0.2 percent in August, in line with expectations.

Consumer prices also rose about as much expected in August, with the price index excluding food and energy increasing 0.2 percent from the prior month. That left inflation excluding food and energy at 1.7 percent in the 12 months through August, up a tenth of a percentage point from the prior month and closer to the Fed’s 2 percent inflation target.

(Reporting by Jason Lange; Editing by Paul Simao)

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)

Colombia reaches deal with truckers to lift 45-day strike

BOGOTA (Reuters) – Colombia’s government and truckers reached a deal on Friday to lift a strike that has stretched 45 days, snarling coffee exports and pushing inflation higher as foodstuff was blocked from moving around the nation.

The two sides reached agreement on cargo prices and the gradual removal of old vehicles, ending the longest and most costly strike in Colombian history, but failed to agree on toll road and fuel costs.

“The immobilization of cargo transport has been lifted,” Transport Minister Jorge Eduardo Rojas told reporters.

One person was killed during clashes, and the governor of Boyaca province was injured in a highway accident that authorities blamed on the protesters.

Trucks blocking highways were impounded, and the government said drivers or truck owners participating in violent protests would have their licenses revoked and face fines.

The strike, which began in early June, caused sharp rises in food prices, clogged ports and hit exports of the country’s high-quality arabica coffee.

Coffee growers are already struggling because of a drought caused by the El Nino weather phenomenon, and are bracing for coming heavy rains, but the strike may send exports plunging by half in July, the coffee federation told Reuters recently.

High food prices have helped push 12-month inflation to 8.60 percent through June, more than double the central bank’s 2 percent to 4 percent target range.

(Reporting by Helen Murphy and Luis Jaime Acosta; Additional reporting by Nelson Bocanegra; Editing by Julia Symmes Cobb and Bernadette Baum)

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