WRAPUP 2-US consumer prices drop, but core inflation firming

Javier Stokes
April 12, 2018

In annual terms, food prices rose by 4.1%, within which eggs became 27.0%, butter 14.2%, pasta products 11.1%, milk products 6.9%, milk 5.9% and bread 5.6% more expensive.

The data comes amid some worries that an escalating trade dispute between China and the United States could stoke price pressures over the coming months, though many analysts believe any impact on consumer prices will be limited.

The March consumer price index dipped 0.1% in March, but year-over-year, it was up to 2.4% from 2.2% in the prior month.

Global financial and research organizations predicted that the inflation will continue its downtrend till the end of this fiscal year; Fitch Rating expected that inflation in Egypt will fall further this year but will remain in double digits, averaging around 13 percent.

Core inflation, which excludes volatile food and energy prices, was up 0.3 percent in March, and 2.7 percent over the past 12 months.

Capital Economics said in a note that "the data support our view. that the central bank will leave interest rates unchanged at Thursday's policy meeting".

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The Federal Reserve tracks a different index, the personal consumption expenditures price index excluding food and energy, which has consistently run below the central bank's 2 per cent target since mid-2012.

Natural gas prices also fell 1.2 per cent, and fuel oil dropped 0.7 per cent in March. "If we are correct, we would expect the Fed to hike three more times in 2018".

The government's gauge of consumer prices fell in March, pulled lower by an unexpected decline in gasoline prices.

Machine orders are expected to sink 2.5% on month and be flat on year after climbing 8.2% on month and 2.9% on year in January.

Average hourly earnings posted the biggest gain since July 2016, rising 0.4 per cent in March, following the 0.1 per cent decline in February, according to a separate report.

Healthcare costs increased 0.4 per cent, with prices for hospital care shooting up 0.6 per cent and the cost of doctor visits rising 0.2 per cent. Apparel prices fell 0.6 per cent after two straight months of robust increases. There were also declines in the cost of telecommunication, used cars and trucks, tobacco and education.

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