US consumer prices rise modest 0.2% in February


Bloomberg Economics estimates the consumer price index rose 4.54% year on year, down from a 5.07% rise in January. 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.

The seasonal trend of rising food prices as summer approaches may prevent further easing of food inflation (3.26% in February) in the ongoing month, said Aditi Nayar, principal economist at rating company ICRA Ltd. The index for all items barring food and energy advanced 0.2 percent after a 0.3 percent expansion in the preceding month. 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.

However, economists at the country's largest lender State Bank of India (SBI) said that the "best is yet to come" and the RBI's inflation targets will be undershot by up to 0.50 percentage points. The energy index also rose modestly though its component indexes were mixed.

In the wake of the Great Recession, 2 percent has been the Fed's target for core inflation.

USA consumer price growth slowed in February amid a decline in gasoline prices and a moderation in the cost of rental accommodation, the latest indication that an anticipated pickup in inflation probably will be only gradual.

The overall CPI increased 0.2% in February on a seasonally adjusted basis, after rising 0.5% in January and was up 2.2% from a year earlier.

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USA consumer prices increased at a modest pace in February, underscoring that inflation pressures appear to be muted for now. The higher than expected rate was driven largely by the increase in the cost of food items, which shot up by 0.87% Month-on-Month.

What sets apart IIP growth in January is the strong growth registered in consumer durables, at 8% compared with 1.4% in the previous month. Over the past 12 months, food prices are up 1.4%.

Chart 1 shows the inflation rate and our forecast for February 2018. In fact, the exceptional 1.7% increase in prices for clothing observed in January - the highest monthly increase since February 1990 - was probably owed to the winter weather, whereas price discounts were more likely again in February given the mild temperatures.

The IIP growth in January this year was mainly on account of uptick in manufacturing sector which constitutes 77.63 per cent of the index.

On the other hand, the industry group "Manufacture of tobacco products" has shown the highest negative growth of (-) 46.5 percent followed by (-) 32.4 percent in "Other manufacturing" and (-) 13.2 percent in "Printing and reproduction of recorded media".

Industrial production grew at 4.1 per cent in April-January this fiscal as compared to 5 per cent in same period in previous financial year.