December inflation up 5.21%, November factory output jumps 8%

December inflation up 5.21%, November factory output jumps 8%

Consumer inflation slowed in December to a tiny 0.1 percent gain as the cost of energy products tumbled following a big jump in November.

The retail inflation, based on Consumer Price Index (CPI), was 4.88 per cent in November.

Core Inflation rose by 1.8%, beating expectations of only a 1.7% rise, the same as November - the Dollar rose and fell in volatile swings after the release of the contradictory data. The reports probably will keep the Federal Reserve on course to increase interest rates in March and raise the prospects of a more aggressive monetary policy tightening this year.

Underlying US consumer prices recorded their largest increase in 11 months in December amid strong gains in the cost of rental accommodation and healthcare, bolstering expectations that inflation will accelerate this year. The cost of both hospital and doctor visits increased 0.3%.

RBI has a mandate to control retail inflation in the country in the range of 4% to 6%. This brought its year-over-year increase to 1.8 percent.

However, the consumer price inflation is expected to come in at 3.6 percent in FY2018 and it is likely to average 5.1 percent in FY2019.

Earlier this month, Finance Minister Arun Jaitley had told Parliament that inflation had increased owing to a seasonal rise in vegetable prices and the higher house rent allowances disbursed to government employees under the 7th Pay Commission recommendations.

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While oil prices have accelerated in January, it may stand out that the December monthly energy prices as a whole were down 1.2% - but gasoline was down 2.7% in December.

Whilst more recent comments from New York Fed President Dudley have been hawkish, after he said, "The Fed may have to press harder on the brakes over the next two years", the Dollar has continued falling as actual data in the form of Producer Prices, otherwise known as PPIs or "factory gate" prices out yesterday, fell below estimates in December.

CPI figures have indicated higher levels of inflation all year, with the PCE measure trailing some way behind at 1.5% - well shy of the Fed's target rate of 2%.

The US central bank is forecasting three rate hikes in 2018. "The indexes for apparel, airline fares, and tobacco all declined over the month", said the Labor Department.

The output of primary goods grew by 3.2 per cent, while that of intermediate goods rose by 5.5 per cent. Food away from home grew 0.2%.

In a separate report on Friday, the Commerce Department said retail sales rose 0.4 percent last month. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 2.2 per cent annualised rate in the third quarter.

Strong growth in manufacturing helped push up industrial growth in November.