Retail inflation eases to 2.05% in January

Daniel Fowler
February 13, 2019

Retail inflation declined marginally to 2.05 per cent in January over the previous month on continued decline in food prices, including vegetables and eggs, said government data on Tuesday.

"Morgan Stanley expects the U.S. core consumer price index (CPI) to rise 0.2 percent in January, in line with its three-month average, but sees the headline CPI falling for the fourth consecutive month to 1.5 percent from 1.9 percent".

Retail inflation for December 2018 has also been revised downward to 2.11 percent from the earlier estimate of 2.19 percent. As well as the sharp decline in energy prices, Whitehall statisticians said the drop in inflation was also fuelled by lower petrol prices and a decline in the cost of hotel rooms.

"It is noteworthy that the path of inflation has moved downwards significantly, and over the period of the next one year, headline inflation is expected to remain contained below or at the target of 4 per cent. The latter should underpin a 0.2% m/m print on core CPI, translating to a 2.1% y/y increase vs 2.2% previously".

Meanwhile, the country's industrial output in December rose 2.4 percent from a year earlier, slightly higher than forecast, government data showed on Tuesday. In urban areas, the inflation rate was 2.91%, the same as in December.

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The convergence of the two measures, along with recent surveys from the central bank suggesting slowing inflationary expectations among households and industry, will be key for a clearer assessment of policy actions by the Monetary Policy Committee. Consumer-price growth reached 2.05 percent in January, well below the Reserve Bank of India's medium term target of 4 percent.

"Unlike when the cap is lowered, energy firms don't have to automatically raise prices when the cap is lifted". Prices of health related goods increased 8.93% while education related goods rose by 7.99%.

The CPI including owner-occupiers' housing costs (CPIH) - the ONS's preferred measure of inflation - was 1.8 per cent in January, down from 2 per cent in December.

"US CPI for January is due out this afternoon".

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