Advertise with

CPI jumps the most in 10 years in US.
CPI jumps the most in 10 years in US.

CPI jumps the most in 10 years in US, boosting case for a rate hike


By Shobhana Chandra - Aug 14th 2018, 09:52

Some items that posted big declines in June reversed course in July, including hotel and motel rates, which rose 0.4%. 

A gauge of US consumer prices jumped by the most in a decade in July, eating into wage gains that have barely budged in the past four months and strengthening the case for the US Federal Reserve to keep raising rates gradually.

The core measure of the consumer price index (CPI), which excludes food and fuel, rose 2.4% from a year earlier, the biggest advance since September 2008, a labour department report showed on Friday. From the prior month, both the main CPI index and core rate rose 0.2% — matching expectations.

While shelter costs gave a big boost to the results, steady consumer demand was underpinning inflation just as a trade war was threatening to lift costs on a range of goods. Sustained progress toward the Fed’s goal was keeping the central bank on track for one or two more rate hikes in 2018, even as price pressures were a blow to already weak increases in wages.

A separate labour department report showed inflation-adjusted wages were unchanged in July from the previous month and dropped 0.2% from a year earlier. The lack of much real wage growth has become a contentious issue for Republicans and Democrats heading into midterm congressional elections in November.

The overall CPI gauge rose 2.9% in the 12 months to end-July, matching the survey median, the report showed. Core CPI was projected to advance 2.3% on an annual basis.

A 0.3% jump in shelter costs accounted for about 60% of the increase in the overall CPI in July, the labour department said.

Some items that posted big declines in June reversed course in July. Among them were hotel and motel rates, which rose 0.4% after a record decline of 4.1% in June. Airfares jumped 2.7%, the most since July 2013, following a 0.9% drop in June.

Apparel decreased again, dropping 0.3% after falling 0.9% the prior month.

The core CPI reading brought the three-month annualised gain to 2.3%, after rising 1.7% in June.

The Fed’s preferred gauge of inflation — a consumption-based figure that tends to run slightly below the labour department’s CPI — has been at, or above, the central bank’s 2% goal since March, though the related core index was still shy of the target. Fed officials see core inflation as a more reliable gauge of underlying price pressures.

Policymakers are widely projected to lift borrowing costs when they meet in September, with many investors expecting an additional hike before the end of 2018. Inflation has made progress, and the unemployment rate, at 3.9% in July, signalled that the Fed was near its maximum-employment goal.

Trade may become a source of price pressures. In picking Chinese goods to target for tariffs, the Trump administration has tried to avoid directly taxing consumer goods. But that’s getting harder to do as trade tension escalates. A list of Chinese products due to be hit with tariffs in September includes consumer items such as digital cameras, selfie sticks and electric scooters.

Business Live 

Read more about: us | rate hike | federal reserve | economy | cpi

Related News

Foschini, Clicks offering good returns
10/06/2019 - 14:55
Prospects for retail sector companies on the JSE had withered this year in line with the slumping economy, but there were outliers, such as Foschini and Clicks, providing good returns for shareholders in the sector, analysts said.

Alibaba plans $20bn Hong Kong listing
05/06/2019 - 10:02
Alibaba is considering raising as much as $20bn through a listing in Hong Kong, people familiar with the matter say, lining up a second blockbuster deal following its 2014 record $25bn float in New York.

US jealousy sparked trade wars, says Chinese ambassador
21/05/2019 - 10:48
The US is jealous of China’s rapid economic growth and achievements in the past few years and was using the trade wars to frustrate and stall it, Lin Songtian, the Chinese ambassador to SA said.

Walmart reveals plans for a new corporate campus
20/05/2019 - 17:04
Corporate America has been under political pressure to ramp up investments at home.

Load-shedding knocks mining and manufacturing in the first quarter
13/05/2019 - 09:36
Despite a better performance in March, both sectors recorded contractions in the first quarter of the year - with production severely constrained by load-shedding.