US Consumer Prices Slow as Gasoline Falls, Rents Moderate

The Consumer Price Index grew 0.2% in February on a seasonally adjusted basis, according to U.S. Bureau of Labor Statistics. Airline fares rose 0.6% on the month but were down 5.4% on the year, while the cost of wireless telephone services dropped 0.5% from January and are down 9.4% from February 2017.

Food inflation, as measured by Consumer Food Price Index, rose to 4.96 per cent in December from 4.35 per cent the previous month.

Core consumer prices, which exclude food and energy prices, also edged up by 0.2% in February following a 0.3% increase in January. January's surge in inflation cemented investors' expectation of an interest rate hike in March and increased the possibility of a fourth hike in 2018.

The S&P 500 and the Dow slipped on Monday as the USA tariffs signed into law last week weighed on industrials, while a rise in tech stocks boosted the Nasdaq to a new record high.

As per use-based classification, the growth rates in January 2018 over January 2017 are 5.8 per cent in primary goods, 4.9 per cent in intermediate goods and 6.8 per cent in infrastructure/ construction goods.

A lower inflation is considered to be an ideal situation for central bank to slash prices to aid industrial and commercial activity.

In a sustained improvement in economic conditions, retail inflation in February eased as food prices softened, while industrial production soared in January.

Inflation fears have intensified this year after a report last month suggested wages were rising more quickly, which can push up prices.

The cumulative IIP growth for the April-January period of the current fiscal, at 4.1 per cent, was lower than the 5 per cent posted in same period of 2016-17.

The January IIP was also boosted by a higher offtake of consumer and capital goods. The year-on-year rate should thus rise from 2.1% to 2.3%, while remaining at 1.8% for the core CPI. The RBI in its monetary policy review last month had estimated retail inflation at 5.1% for January-March 2018.

Prices for women's and girls' apparel increased 1.5% in February, while men's and boys' clothing prices were up 1.7%. Strong IIP growth of 7.5 percent in January; capital goods grow by 14.6 percent; manufacturing at 8.7 percent; infrastructure/construction goods at 6.8 percent.

With a fall in vegetable prices and recent financial market developments, the report highlighted that a "Pandora's Box" has been opened for the RBI, awaiting its response.

A survey of small businesses published on Tuesday showed the share of owners reporting higher selling prices in February hit its highest level since July 2014. The weekly average was up from 78.60 per pound the week before and further above the 74.84 cents per pound reported the corresponding period a year ago, USDA said.

Vanessa Coleman