Core inflation edges up in US
AMERICA is facing the dreaded prospect of “stagflation”, key economic data releases suggested yesterday.
Underlying inflation rose to its highest in almost three years in May, while separate reports exposed disappointingly flat industrial and manufacturing activity.
US industrial output edged up just 0.1 per cent in May as supply chain disruptions from Japan’s earthquake stalled auto production for another month, the Federal Reserve said.
“Although the weak reading was caused by the unstable utilities index component, the data adds to anxiety about the economy’s trajectory,” said Tim Ohlenburg of the Centre for Economics and Business Research.
And a survey of New York State manufacturing activity plummeted to -7.79 in June, the lowest since November 2010, from a reading of 11.88 in May.
The housing sector, which was at the epicentre of the US financial crisis and recession, also showed little sign of healing. Following a renewed decline in home prices in recent months, a homebuilder sentiment index published by an industry group plunged to its lowest since November 2010 this month.
US inflation proved firmer than expected in May despite lower fuel costs. The overall consumer price index rose 0.2 per cent, when analysts had been looking for a 0.1 per cent rise.
In the year to May, prices climbed 3.6 per cent, the largest rise since October 2008.
Core inflation jumped from 1.3 per cent to 1.5 per cent. “This leaves the core inflation rate bang in the middle of the Fed’s implicit comfort zone,” said ING’s Rob Carnell, “and ignoring the activity side of the argument, is utterly inconsistent with the Fed’s current policy of exceptionally accommodative monetary policy.”