January’s consumer prices proved more robust than expected

From NAM’s Manufacturing Economy Daily blog

The Labor Department on Friday said its consumer price index was unchanged in January, as falling oil prices offset rising costs of housing and healthcare, Bloomberg News  reported, adding that economists had forecast a 0.1% decrease. For the 12 months ending Jan. 31, the CPI was up 1.4%. Core CPI, which excludes the volatile food and energy categories, rose 0.3% in January and 2.2% for the 12-month period. Bloomberg said the “tightening labor market and nascent signs of wage growth bode well for domestic demand, a rebound in which could help stoke inflation if energy costs stabilize.”

The Wall Street Journal  said the Labor Department data indicate inflation may be solidifying despite the decline in energy prices and strength of the dollar. PNC economist Gus Faucher said, “Broad-based price growth is signaling that the wage and price pressures are building, an indication that the economy is expanding at a solid pace and that recessionary concerns are overdone.”

According to Reuters, the stronger core CPI figure may mean the Federal Reserve will follow through on its plan to raise interest rates after skipping March. The AP (2/19, Boak) quoted BMO Capital Markets’ Jennifer Lee as saying the CPI report “affirms the Fed’s decision and raises the potential for further rate increases later this year.”

State Department Official: Output Freeze Unlikely To Boost Oil Prices. Reuters, cites Amos J. Hochstein, the State Department’s special envoy for international energy affairs, as expressing doubt that an oil production freeze agreed to by Russia, Saudi Arabia, Qatar, and Venezuela would succeed in raising oil prices. Hochstein said that even if other producers follow suit, they would be capping their production near historically high levels, which would do little to reverse a global glut. He added that he remains skeptical that Iran, a linchpin in the success of any agreement, would agree to cap exports near sanctions-era lows.

Associated Industries of Missouri is the sole official designated partner of the National Association of Manufacturers in Missouri.