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Latest data question US inflation is under control

Wednesday, December 20th 2006 - 20:00 UTC
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United States producers' prices (wholesale prices) registered last November the biggest increase in three decades, while the housing slump showed signs of bottoming out.

The latest official data challenges the notion that US inflation was under control. The producer price index climbed 2% in November from a month earlier, led by higher costs of gasoline, the Labour Department said Tuesday in Washington. The figure is almost four times what markets were expecting. Housing starts rose at an annual rate of 1.588 million last month, more than forecast and 6.7% higher than in October, the Commerce Department said. Six months of slowing economic growth haven't defeated inflation seem to indicate the latest data. The US Labour Department figures also show the core index, which excludes food and energy, increased by 1.3% in November, the highest since July 1980, after having fallen 0.9%. November's producers' prices rise comes after a 1.6% declination in October, which means wholesale prices have yet not reflected in consumer prices which were flat in November. Energy prices jumped 6.1% last month, the most since February 2003, after decreasing 5 % in October. The price of gasoline surged 17.9%, the biggest rise since June 2000, and natural gas costs rose 5.9%. The US Federal Reserve left interest rates unchanged at 5.25% last week, but continued to voice concerns over inflation. San Francisco Federal Reserve vice-president Simon Kwan said US growth will be below the tendency in 2007 and forecasted that expansion in the last quarter of 2006 "will be below 2%". However there will a slight rebound in 2007, "but below the tendency and close to a 2.5% rate", he added.

Categories: Economy, International.

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