U.S. Inflation Picks Up, Ending Five-Month Streak of Misses
Inflation may finally be getting back on track to reach the Federal Reserve’s goal, as the U.S. cost of living accelerated following a weak stretch of readings, Labour Department data showed Thursday.
HIGHLIGHTS OF CONSUMER PRICE INDEX (AUGUST)
- Consumer-price index increased 0.4% m/m (est. 0.3% gain) after 0.1% rise the prior month; rose 1.9% y/y (est. 1.8%)
- Excluding food and energy, so-called core CPI rose 0.2% m/m (matching est.) after rising 0.1%; up 1.7% y/y (est. 1.6%) after 1.7% advance
- Increase in core index driven by biggest gain in shelter since 2005; lodging category rose by a record, rebounding from a drop that dragged down inflation in the previous month
The 0.2 percent rise in the core gauge ends a five-month streak of weaker-than-expected readings, and may soothe some concerns that inflation is slowing more broadly, though it will take more readings to determine whether the pickup can be sustained. The increase in the lodging category indicates the earlier decline in the sector was transitory. Energy prices rose by the most since January and may reflect some impact from Hurricane Harvey. CPI data is collected throughout the month, and since the storm occurred in late August, the Bureau of Labour Statistics expects most of the data to come from before the storm, BLS economist Steve Reed said Wednesday. Data collection was disrupted in two of the 87 U.S. urban areas where prices are gathered.
U.S. jobless claims fall, but impacted by Harvey and Irma
The number of Americans filing for unemployment benefits unexpectedly fell last week, but the data was impacted by hurricanes Harvey and Irma, making it difficult to get a clear pulse of the labour market. Initial claims for state unemployment benefits declined 14,000 to a seasonally adjusted 284,000 for the week ended Sept. 9, the Labour Department said on Thursday. A Labour Department official said hurricanes Harvey and Irma had impacted on last week’s claims data. Claims shot up 62,000 in the week ended Sept. 2 after Harvey, which ravaged Texas, left some workers temporarily unemployed. Claims for Texas increased 51,683 during that week. Following the initial rush, filings in the state declined last week. Irma, which made landfall over the weekend, led to office closures this week. As a result, the Labour Department estimated claims for Florida, Georgia, South Carolina and Virgin Islands. Economists polled by Reuters had forecast claims rising to 300,000 in the latest week. The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, rose 13,000 to 263,250 last week, the highest level since mid-August 2016.
China’s economy losing some steam as investment growth hits 18-year low
China posted a rare flurry of disappointing data on Thursday — including its slowest growth in investment in nearly 18 years — suggesting the world’s second-largest economy is finally starting to lose some momentum as borrowing costs rise. Factory output and retail sales also grew less than anticipated, though a rebound in property sales and construction starts is likely to keep China’s overall growth relatively robust and comfortably on target ahead of a key leadership reshuffle next month. “I think the risk (for China) isn’t in the next couple of months but rather the next couple of years,” said Capital Economics’ Julian Evans-Pritchard. “Progress on key structural reforms that really matter, such as boosting the performance of state-owned enterprises, has been quite slow and the structural drags on growth remain quite strong and are real risks.” Analysts had widely expected China’s August data to show industrial output and retail sales growth had accelerated after fading slightly in July, while investment was seen as only marginally softer. That would have fit into a pattern of stronger-than-expected readings from China in the first half of the year and upbeat surveys on August factory activity. A year-long, government-led construction boom has lifted demand and prices for everything from cement to steel to glass, helping offset an expected drag from property cooling measures and a regulatory crackdown on riskier types of financing.
German bond yields edge back from 3-1/2-week high as supply abates
Germany’s 10-year bond yield edged off 3-1/2 week highs on Thursday as heavy upward pressure on euro zone bond yields from supply abated. Government bond yields in Germany, the bloc’s biggest economy and its benchmark bond issuer, are up 11 basis points from 2-1/2 month lows hit at the end of last week. A bond market selloff that began on Friday after a report that European Central Bank rate-setters agreed last week to start reducing bond purchases, accelerated this week as markets absorbed more than 15 billion euros of bond issuance from the bloc. Ireland sold 1 billion euros of bonds on Thursday. That followed an unexpected 3.5 billion euro sale of 100-year bonds from Austria earlier this week. Germany, the Netherlands and Italy have also held bond auctions as supply from the region picks up after a summer lull. Investors often sell existing bonds to make way for new ones, putting upward pressure on bond yields. “Supply may be easing today but it remains the theme of the week,” said Rabobank fixed income strategist Lyn Graham-Taylor. Having risen in early trade, most euro zone bond yields dipped after the Irish bond auction to trade 1-2 basis points lower on the day.