US Consumer Prices Unchanged In June Amid Falling Energy Prices

Herbert Rhodes
July 16, 2017

The dollar extended its earlier decline against a basket of major currencies on Friday, after weaker-than-forecast data on consumer prices and retail sales in June raised doubts about USA economic growth and whether the Federal Reserve would raise interest rates again in 2017. That, however, started to show-up on Friday morning when we got even more disappointing USA data.

Data from the Labor Department showed that consumer price index was flat in June after edging down by 0.1% in May.

Yet on Thursday, in a second day of testimony before Congress, Yellen sought to clarify those views and said it would be "premature" to conclude that inflation will remain weak. The central bank usually tries to aim for 2% core inflation or less.

The annualized rate of inflation in several CPI components over the past three months showed declines of 4.9 per cent in apparel, 5.5 per cent in used cars and trucks and 4.1 per cent in professional services, said Heidi Learner, chief economist in NY for brokerage Savills Studley, a unit of Savills Plc.

However, the core consumer price index (CPI) is forecast to have risen only 1.7 percent year-on-year in June after a similar gain in May.

The New Zealand dollar was trading at 73.16 United States cents as at 5 pm from 72.84 cents late yesterday but was weaker versus last Friday in NY when it traded at 73.80.

Money markets pricing suggests less than a 50 percent chance of a hike over the next year, according to CME's FedWatch tool.

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Federal Reserve Chair Janet Yellen hinted on Wednesday that the Fed could slow its rate hike plans if inflation continues to run below the Fed's 2 percent target.

Headline inflation is also showing in decline after a steep rally, as shown in the 5-year historical chart for headline inflation - which includes energy and food inflation - below. The Standard & Poor's 500 index gained 0.2 percent to 2,447.83.

There were also decreases in airline fares and prices for apparel, household furnishings, new motor vehicles, and used cars and trucks.

Drugmaker AstraZeneca AZN.L continued Thursday's slide, down 1.6 percent due to uncertainty around reports that CEO Pascal Soriot was preparing to leave the company.

Wall Street expected a 0.1% gain in overall retail sales and a 0.2% rise ex-autos. Retail sales rose 2.8 per cent year-on-year in June. Even excluding for vehicle sales, which have declined recently, retail sales figures still posted a 0.2% drop. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

In a report, the U.S. Commerce Department said that consumer prices was unchanged in June from a month earlier, compared to forecasts for 0.1% increase and a 0.1% drop in the prior month.

The earnings from the major banks kick off the second-quarter earnings season, which gets very busy next week. In a third report on Friday, the Fed said industrial production increased 0.4 per cent in June after gaining 0.1 per cent in May.

Other reports by TheSundaySentinel

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