Featured # Markets | 4 years ago

Robust U.S. Data Aids Second-Quarter Growth

U.S. consumer prices reported their strongest increase in over three years as both gasoline and rents spiked, pointing to a steady build up of inflation that could give the U.S. Federal Reserve the ammunition they need to raise interest rates for late 2016. Other data on Tuesday additionally displayed rebounds of housing starts and industrial production for last month. This suggests that the economy is regaining stream early for the second quarter after the scare of almost stalling in January.

The U.S. Labor Department published that its Consumer Price Index, or CPI, rose by 0.4 percent in April, the largest gain since February 2013, after increasing 0.1 percent in March. That brought the year-on-year increase for the CPI from 0.9 percent in March to 1.1 percent now in May. Americans nationwide additionally paid more for medical care, food, tobacco, motor vehicle insurance, recreation, grooming and airline fares. Experts and economists forecasted in an official poll for the CPI to gain 0.3 percent last month, advancing 1.1 percent from a year ago.

The core CPI, which leaves out food and energy costs, increased by 0.2 percent after climbing 0.1 percent late March. Within the last 12 months, the core CPI spiked 2.1 percent. The Federal Reserve has a 2 percent inflation target and a inflation measure of 1.6 percent. Fed officials who persistently show concerns about inflation reaching its target likely welcome the sudden rise in prices for April.

“Inflation pressures are picking up, I don’t think there is any need for the Fed to panic. They don’t need to hit their inflation target and declare victory,” said senior economist Ryan Sweet, of Moody’s Analytics in West Chester, Pennsylvania. “They need to allow inflation to run hot for a little bit.”

Manufacturing production increased by 0.3 percent, as motor vehicles and parts output rose a healthy amount. Mining output fell 2.3 percent as it is undermined by the delayed oil price plunge between June 2014 and December 2015. That event caused a sharp fall in capital spending by energy firms. The inflation report displayed gas prices jumping 8.1 percent within the month of April, which is their largest gain since August of 2012. Food prices also rose 0.2 percent after falling by the same amount in March.

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