Inflation comes with strong economy, but not in China

US inflation accelerated in January.

Consumer prices surged 0.7 percent last month, above Wall Street forecasts for a 0.5 percent increase, as energy costs soared. But the closely watched core Consumer Price Index, which excludes volatile food and energy costs, rose just 0.2 percent, matching expectations...

Over the past year, consumer prices have climbed 4 percent, the largest 12-month increase since October 2005 and an acceleration from December's 3.4 percent increase... On a year-over-year basis, core prices were up 2.1 percent, however, a slowdown from December's 2.2 percent increase and in-line with Wall Street forecasts...

In a separate report, the Labor Department said real average weekly earnings fell 0.2 percent in January, the first decline since September, after a 0.5 percent gain in December. Average weekly earnings have risen 3.6 percent since January 2005, but since inflation has risen even faster, real earnings remain 0.4 percent lower than a year earlier.

Markets, however, apparently focused on the core inflation rate.

Major U.S. stock indexes rose, with traders focusing on the core CPI and a more than $1 drop in oil prices. Treasury debt prices also rose, while the U.S. dollar pared gains following the report.

However, Michael Bryan, posting at the macroblog, "looked at the data sliced a number of different ways and they tell a pretty consistent story—they seem to be inching a little higher".

That would be consistent with how the global economy has generally been performing, which is strong.

Industrial new orders in Europe continued on an uptrend in December.

The euro-zone industrial new orders index rose by 2.5% in December 2005 compared to November 2005. The index increased by 5.3% in November3 and decreased by 0.5% in October. EU25 new orders grew by 2.3% in December 2005, after rises of 3.8% in November and 0.1% in October.

February factory orders from the UK also shows improvement.

The Confederation of British Industry said its monthly manufacturing order books balance was -18 in February after -28 in January.

That compared with analysts' forecasts for a reading of -25 and a big improvement on the average of -26 over the last six months...

The slowing decline in orders boosted firms' expectations for future output, with the balance rising to +10, the highest since February 2005, from +1 in January.

Sentiment in Europe is optimistic.

An index of sentiment of French manufacturers rose to 105, the most since January 2005, from 103, said Insee, the national statistics office, in Paris today. An Italian consumer confidence gauge climbed to 110, the highest since September 2002, from a revised 106.5, the Rome-based Isae Institute said.

And yet, the hottest economy of all is not seeing much inflation.

China's consumer price index (CPI) rose by 1.9 percent in January from the same month last year, the National Bureau of Statistics (NBS) said Wednesday.

Producer prices reported a day earlier would have provided an inkling.

China's industrial producer prices increased by 3.1 percent in January over the same period of 2005, the National Bureau of Statistics said (NBS) Tuesday...

Producer prices for consumer products, however, slid by 0.3 percent...

That apparently leaves the People's Bank of China uncertain over China's future price trend.