US PPI down, core up, UK inflation up

The inflation data yesterday was a little mixed, but on the whole, show few signs of inflation abating.

Reuters reports that US producer prices plunged in February but core prices were up.

Plunging food and energy costs pulled U.S. producer prices down a surprisingly steep 1.4 percent in February, the biggest drop in nearly three years, but...core PPI, which strips out volatile food and energy costs, rose 0.3 percent last month after a 0.4 percent gain in January...

The 0.3 percent rise in prices outside of food and energy pushed the 12-month change in the core producer price index up to a gain of 1.7 percent from an increase of 1.5 percent in the year ended in January.

Overall producer prices have risen 3.7 percent over the past 12 months. That marked a slowdown from the 5.7 percent gain registered through January and signaled some easing in energy-led inflation pressures.

In the UK, consumer price inflation reversed a downward trend in February, according to another Reuters report.

The Office for National Statistics said consumer prices rose 0.3 percent last month, raising the annual rate a tenth of a point to 2.0 percent, hitting the Bank of England's target level for the first time since June 2005.

Inflation had appeared to be on a downward trend after peaking at 2.5 percent in September but the latest rise could mark the return of upward price pressures, particularly if recent hikes in utility bills start feeding into the March data.

This adds to doubts over future rate cuts, as do comments by Bank of England Monetary Policy Committee member Kate Barker yesterday that interest rates are "probably around a neutral level or slightly accommodative" even as she says that "the most likely outcome is for a slightly slower pace of UK growth in 2006 than the MPC's February central projection".