Thursday 18 January 2007

US data show inflation pressures remain

There were plenty of economic data from the US yesterday. Reuters summarises:

The Labor Department's Producer Price Index increased 0.9 percent in December. Excluding volatile food and energy prices, the index advanced a smaller 0.2 percent.

The Fed reported industrial output that was stronger than expected in December, rising 0.4 percent on robust gains in manufacturing and mining. For all of 2006, industrial output grew 4 percent, the biggest annual gain in six years...

The...Beige Book report...pointed to modest economic growth at the end of last year.

While many companies were looking for employees with special skills, the Fed report said housing markets continued to soften and that bulging inventories of unsold homes were slowing construction.

However, other data on Wednesday showed U.S. home-builder sentiment has improved in January to its strongest since last summer amid price cuts and other incentives. But mortgage applications fell last week.

The rise in the PPI and the relative resilience of the economy indicate that some inflation risks remain. Now where have we heard that before?

Perhaps in the UK. But the latest employment data provide a mixed picture. Reuters reports:

The Office for National Statistics said average earnings including bonuses rose 4.1 percent, below forecasts for an increase of 4.2 percent.

Claimant count unemployment fell by 5,500 in December, nearly double the 3,000 decline forecast by analysts and the third straight month of decline...

The internationally-comparable ILO jobless rate came in at 5.5 percent in the three months to November, as expected. The number of people unemployed fell 29,000 to 1.674 million.

Meanwhile, inflation in the euro zone in December has been confirmed at 1.9 percent, unchanged from November.

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