Industrial output picks up, retail inflation dips

That would slow economic growth. The Fed said in December that it anticipates three interest rate increases in 2018, and newly seated Fed Chair Jerome Powell hinted Tuesday that the central bank would not deviate from those plans going forward, so long as the market shows signs of continued growth.

Given strong consumer demand, companies "have decent pricing power and are likely to pass these higher costs on through their prices", ING chief global economist James Knightley said in a note.

The U.S. consumer price index has been mostly at 1.7 percent over the last 12 months.

However, core inflation that excludes energy, food, alcoholic beverages and tobacco, accelerated to 2.7 percent from 2.5 percent in December, which was also above the expected 2.6 percent.

According to the report, the corresponding twelve-month year-on-year average percentage change for the urban index is 16.55 per cent in January 2018. It said the Retail Prices Index (RPI), which is used to calculate payments on government bonds, student loans and other commercial contracts, edged down to 4% from December's six-year high of 4.1%. It said, however, that after rising strongly since the middle of 2016, food price inflation now appeared to be slowing.

FILE PHOTO: A woman shops at an H&M store in New York City, U.S. December 23, 2017. "These trends support our view that a part of the spike in manufacturing growth in November 2017 was a catch-up because of the muted volumes in the earlier months of the fiscal, which would ebb away", said Aditi Nayar, Principal Economist, ICRA.

Certain sectors that saw a robust pickup in December may settle back in January, including medical goods and cars, according to Bloomberg Economics.

Inflation reached its highest level since 2012 in November at 3.1% and it has since remained stubbornly close to that level. Price pressures are also seen being fanned by fiscal stimulus in the form of a $1.5 trillion USA tax cut package and increased government spending.

Headline consumer price inflation was unchanged at 3% in January. Construction goods jumped to 6.7 percent during December after growing at its fastest pace in almost five years at 13.5 percent in November aided by expansion in steel and cement output. However, we believe a large amount of improvement in consumer demand is likely to further rely more on imports rather than substantial pick-up in the domestic production. A deeper look at the report showed cost for telecommunications falling 1.3% in December to lead the decline, with prices for clothing & footwear narrowing 0.9%, while transportation costs increased 2.2% during the same period.

  • Eleanor Harrison