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Money Inflation steady as U.S. labour market remains strong

18:08  12 july  2018
18:08  12 july  2018 Source:   reuters.com

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That suggests robust labor market conditions prevailed in early July after the economy added 213,000 jobs in June. Steadily rising inflation , however, is eating into workers’ modest wage gains. Inflation -adjusted average weekly earnings rose 0.1 percent in June following a similar gain in May.

U . S . consumer prices barely rose in June, but the underlying trend continued to point to a steady buildup of U . S . financial markets were little moved by the data. In another report on Thursday, the Labor Department said initial That suggests robust labor market conditions prevailed in early July.

U.S. consumer prices barely rose in June, but the underlying trend continued to point to a steady buildup of inflation pressures that could keep the Federal Reserve on a path of gradual interest rate increases.

Other data Thursday showed first-time applications for unemployment benefits dropped to a two-month low last week as the labor market continues to tighten. The Fed raised interest rates in June for a second time this year and has forecast two more rate hikes before the end of 2018.

"U.S. inflation continues to drift gradually higher in response to a nearly fully employed economy, with some nudging from tariffs," said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. "The Fed has every reason to pull the rate trigger again in October."

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The strong labor market and robust economy are pushing up inflation . Import duties are also seen boosting price pressures. The Fed raised interest rates in June and has forecast two more hikes by December. Data on Friday is expected to show a steady broad increase in consumer prices in July.

A tightening labor market and rising raw material costs are expected to push up inflation through next year. Manufacturers are facing rising input costs, in part because of tariffs imposed by the Trump administration on lumber, aluminum and steel imports.

The Labor Department said its Consumer Price Index edged up 0.1 percent as gasoline price increases moderated and the cost of apparel fell. The CPI rose 0.2 percent in May. In the 12 months through June, the CPI increased 2.9 percent, the biggest gain since February 2012, after advancing 2.8 percent in May.

Excluding the volatile food and energy components, the CPI rose 0.2 percent, matching May's gain. That lifted the annual increase in the so-called core CPI to 2.3 percent, the largest rise since January 2017, from 2.2 percent in May.

Economists polled by Reuters had forecast both the CPI and core CPI rising 0.2 percent in June.

The Fed tracks a different inflation measure, which hit the U.S. central bank's 2 percent target in May for the first time in six years. Economists expect the personal consumption expenditures (PCE) price index excluding food and energy will overshoot its target.

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U . S . consumer prices recorded their largest increase in nearly 6-1/2 years in the year through June, while the monthly pace continued to suggest a steady buildup of inflation that could keep the Federal Reserve on a path of gradual interest rate increases.

Labour market strength and a steady increase in price pressures could allow the Federal Reserve to raise It was the 158th straight week that claims remained below the 300,000 threshold, which is Diminishing labour market slack is also expected to help boost inflation toward the U . S . central

U.S. financial markets were little moved by the data.

In another report on Thursday, the Labor Department said initial claims for state unemployment benefits dropped 18,000 to a seasonally adjusted 214,000 for the week ended July 7, the lowest level since early May.

That suggests robust labor market conditions prevailed in early July. The economy created 213,000 jobs in June.

A tightening labor market and rising raw material costs are expected to push up inflation through next year. Manufacturers are facing rising input costs, in part because of tariffs imposed by the Trump administration on lumber, aluminum and steel imports.

So far, they have not passed on those higher costs to consumers. Fed officials have indicated they would not be too concerned with inflation overshooting its target.

Last month, gasoline prices rose 0.5 percent after increasing 1.7 percent in May. Food prices gained 0.2 percent, with food consumed at home rebounding 0.2 percent after falling 0.2 percent in May. Food prices were unchanged in May.

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Labor market strength and a steady increase in price pressures could pave the way for the The economy created 313,000 jobs in February and the unemployment rate remained at a Diminishing labor market slack is also expected to help boost inflation toward the Fed’ s 2 percent target.

“The labor market remains strong , and my colleagues and I on the Federal Open Market Committee expect it to remain strong ,” Mr. Powell told the Economic Club of Chicago, according to prepared remarks released by the central bank. He added that he would be “looking for an additional pickup in

Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.3 percent last month after increasing by the same margin in May. But the cost of hotel accommodation fell 3.7 percent after rising 2.9 percent in May.

Healthcare costs advanced 0.4 percent, with the price of hospital services surging 0.8 percent. Healthcare prices gained 0.2 percent in May. Consumers also paid more for prescription medication last month.

Prices for new motor vehicles rose for a second straight month. There were also increases in the cost of communication, motor vehicle insurance, education and alcoholic beverages.

But apparel prices fell 0.9 percent after being unchanged in May. The cost of airline tickets declined for a third straight month. Prices of household furnishings and tobacco also fell last month.

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