Consumer prices rose the most in four months in January as the price of gasoline jumped, highlighting a growing concern that higher energy costs could slow the economic recovery.
In a report that might also give the U.S. Federal Reserve some pause over the possibility of easing monetary policy further, the Labor Department said on Friday its Consumer Price Index rose 0.2 percent last month.
The gain was just below analysts’ expectations of a 0.3 percent increase.
Stripping out food and energy for the so-called core reading, prices rose 0.2 percent, which was in line with expectations.
However, the report showed the rate of core price increases in the twelve months through January unexpectedly climbed to 2.3 percent.
While the Fed specifically targets a different measure of inflation, the increase in the 12-month core reading, which is seen as a barometer of inflation trends, might be read as a sign that inflation pressures are not subsiding as quickly as expected.
Alan Ruskin at Deutsche Bank: No significant surprises in the CPI report. Core CPI shows a few signs of edging marginally higher thanks to owners equivalent rent now stuck firmly at 0.2% per month, and medical care running near 4% annualized. Strong apparel offset vehicles, and most other components were fairly close to trend. Core CPI probably has to accelerate beyond 2.5% annualized over 3 months to become another factor that will make the market question whether the Fed can keep its prospective tightening to late 2014 or beyond.
Dan Greenhaus at BTIG: With regards to the January CPI, the results were largely in line with expectations. Gasoline prices were supposed to rise; they did. Used car prices were supposed to fall; they did. The large jump in apparel prices is interesting though. Irrespective of what expectations were, the apparel price index has surged since early 2011 and is no doubt having an effect on clothing prices. Apparel prices are up at a more than 6% annualized pace since the spring of 2011. Importantly, owner’s equivalent rent – which itself is roughly 30% of the core CPI – remains relatively constrained…We do not expect a rapid rise in core inflation over the rest of this year and indeed, core inflation could move lower if other components perform in a particularly weak way. But developments on the rental front must be watched for indications that a calm viewing of the inflation landscape is misguided.
Germany wants euro-area finance chiefs discussing the Greek crisis next week to avoid splitting consideration of a 130 billion-euro ($171 billion) rescue and a bond swap of the nation’s debt, coalition lawmakers were told.
As long as Greece meets conditions for the aid, the finance ministers gathering in Brussels will probably approve the package along with the debt exchange, three German officials involved in a telephone briefing by German government officials said. A Finance Ministry spokesman declined to comment.
Wrangling among euro-area finance ministers on a Feb. 15 conference call over how to reduce Greece’s debt load and tighten control of the aid raised the prospect of a two-step process, according to two people familiar with the talks. In that scenario, the ministers’ Feb. 20 gathering in Brussels would be limited to kicking off the bond exchange and deferring decision on the rest of the bailout funds.
Stocks to Watch
SunPower swung to a fourth-quarter loss on charges mostly related to a utility and power plant project, but the loss, when adjusted, was better than expected. The company also said it aims to make a profit in 2012. Shares rose 11.9% to $8.37 in after-hours trading Thursday.
Applied Materials’ fiscal first-quarter profit slumped 77% on weaker sales and acquisition costs, though the semiconductor-equipment maker said recent orders would deliver a stronger result in the second quarter. Shares rose 5.6% to $13.95 after hours on the upbeat outlook and stronger-than-expected core results.
Allscripts swung to a fourth-quarter profit on prior-year charges related to its acquisition of Eclipsys Corp. Shares fell 5.7% to $20.25 in after-hours trading as the company gave a cautious profit view for the current quarter.
Overnight Headlines (Links)
Germany’s President Steps Down
Google Bypassed iPhone Settings
Traders Manipulated Key Rate, Bank Says
European Banks Cling to U.S. Operations
Times Correspondent Dies in Eastern Syria
Economics/FedSpeak
- 10:00 am: Leading indicators: Economists are looking for a 0.5% rise in January, compared to a 0.4% gain a month earlier.
Earnings:
- Amerigroup
- Barnes
- Campbell Soup
- Enbridge
- Encana
- HJ Heinz
- LifePoint Hospitals
- Pilgrim’s Pride
- Ventas