Inflation a concern to US, relief to Japan, slows in Germany

Yesterday's news from the US was supposed to be about personal income and spending, but the focus was mostly on inflation. From Reuters:

Surging energy costs helped push U.S. consumer prices up by a sharp 0.5 percent in April and weighed on shoppers' moods in May as worries of higher future inflation grew, reports showed on Friday.

But the data showed core prices, which strip out volatile food and energy costs, rose only a moderate 0.2 percent last month and left financial markets none the wiser as to whether the Federal Reserve would hike interest rates in June...

The rise in overall consumer prices in April took a big bite out of American paychecks. While the Commerce Department said personal income rose 0.5 percent last month, it dropped 0.1 percent after accounting for inflation and taxes.

While consumer spending rose a hearty 0.6 percent, it edged up just 0.1 percent on an inflation-adjusted basis.

No wonder consumer sentiment is souring.

Separately, the University of Michigan said that its index of consumer sentiment fell in May to 79.1 from April's final reading of 87.4, according to sources who saw the subscription-only report.

In addition, the university found expectations of inflation five years out rose to 3.2 percent, matching October's post-hurricane reading in a troubling sign for the Fed.

Financial markets were unfazed though.

Financial markets were relieved the data, which followed unexpectedly strong readings in the popular core consumer price index, did not show greater inflation pressure.

Prices for both government bonds and U.S. stocks rose, with the blue-chip Dow Jones industrial average closing up 0.60 percent at 11,278.61 points.

Japan, on the other hand, is quite happy to see some inflation. From AFP/CNA:

Japan reported Friday a further easing of deflationary pressures in April when core consumer prices rose for a sixth straight month with a gain of 0.5 percent from the same month a year earlier.

While in Germany, inflation actually slowed. From Bloomberg:

The inflation rate declined to 1.9 percent from 2 percent in April, the Wiesbaden-based Federal Statistics Office said today in a faxed statement. The slowdown matched the median of 38 forecasts in a Bloomberg News survey.