Daily Archives: Jul 11, 2019

WASHINGTON (Reuters) – U.S. underlying consumer prices increased by the most in nearly 1-1/2 years in June amid solid gains in the costs of a range of goods and services, but that will likely not change expectations the Federal Reserve will cut interest rates this month.

Signs of a pick-up in underlying inflation, together with a strong labor market could, however, temper expectations that the Fed will lower borrowing costs at least twice this year.

A rate cut at the July 30-31 policy meeting, the first in a decade, is almost certain after Fed Chairman Jerome Powell on Wednesday told lawmakers the U.S. central bank would “act as appropriate” to protect the economy from rising risks such as trade tensions and slowing global growth.

The Labor Department said on Thursday its consumer price index excluding the volatile food and energy components rose 0.3% last month. That as the largest increase since January 2018 and followed four straight monthly gains of 0.1%.

The so-called core CPI was boosted by strong gains in prices for apparel, used cars and trucks, as well as household furnishings. There were also increases in the cost of healthcare and rents. In the 12 months through June, the core CPI climbed 2.1% after advancing 2.0% in May.

But the overall CPI edged up 0.1% last month, held back by cheaper gasoline and food prices, matching May’s rise. It increased 1.6% year-on-year in June after rising 1.8% in May.

Economists polled by Reuters had forecast the CPI unchanged in June and the core CPI gaining 0.2%.

The Fed, which has a 2% inflation target, tracks the core personal consumption expenditures (PCE) price index for monetary policy. The core PCE price index increased 1.5% year-on-year in May and has undershot its target this year.

The Fed last month downgraded its inflation projection for 2019 to 1.5% from the 1.8% projected in March. Powell on Wednesday said “there is a risk that weak inflation will be even more persistent than we currently anticipate.”

STRONG LABOR MARKET

In another report on Thursday, the Labor Department said initial claims for state unemployment benefits declined 13,000 to a seasonally adjusted 209,000 for the week ended July 6, the lowest level since April. Economists polled by Reuters had forecast claims rising to 223,000 in the latest week.

The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 3,250 to 219,250 last week.

Sustained labor market strength could help support the economy, which is also slowing as last year’s massive stimulus from tax cuts and more government spending fades. Manufacturing is struggling, the trade deficit is widening again, consumer spending is rising moderately and the housing sector remains mired in a soft patch.

Despite the rising risks to the 10-year old economic expansion, the longest in history, the labor market remains healthy. The economy created 224,000 job in June. The tightening labor market has, however, not generated robust wage gains. This has helped to keep inflation moderate.

The dollar trimmed losses against a basket of currencies after the data, while U.S. Treasury prices fell. U.S. stock index futures pared gains.

In June, owners’ equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.3%, matching May’s gain. The rent index shot up 0.4%. Healthcare costs increased 0.3%, after a similar advance in May. There was a 1.1% surge in the cost of dental services, but prescription drug prices fell 0.6%.

Apparel prices jumped 1.1% after being unchanged in May. Prices for these goods tumbled in March and April after the government introduced a new method and data to calculate their cost. Used motor vehicles and trucks prices accelerated 1.6% in June after declining for four straight months.

The price of household furnishings and operations rose 0.8%, the biggest gain since 1991, driven by rising costs for gardening and lawn care services. There were also increases in the costs of motor vehicle insurance, education, new vehicles, communication and alcohol.

But consumers paid less for gasoline last month, with prices dropping 3.6% after falling 0.5% in May. Food prices were unchanged last month after rebounding 0.3% in May. Food consumed at home fell 0.2% amid declines in the prices for beef, fish, eggs, cereals and fruit and vegetables.

Reporting by Lucia Mutikani; Editing by Andrea Ricci

    (Reuters) – A storm churning in the Gulf of Mexico and aimed at water-logged New Orleans was expected to make landfall as the first Atlantic hurricane of the 2019 season by late Friday or early Saturday, forecasters said.

    The storm, which forecasters said might escalate to a tropical storm by late Thursday, had maximum sustained winds of 35 miles per hour (55 kph) as of Thursday morning, the National Weather Service said.

    Meteorologists predicted between 10 and 20 inches (25 and 50 cm) of rain would fall on the Gulf Coast on Friday and Saturday from West Texas through New Orleans and the Louisiana coast.

    “The whole area is in for a soaking, the worst of it on Saturday,” said David Roth, a meteorologist from the National Weather Service’s Weather Prediction Center.

    The storm remained a tropical disturbance early on Thursday about 115 miles (185 km) south-southeast of the mouth of the Mississippi River, the National Hurricane Center said.

    The storm will be named Barry if it strengthens into a tropical storm with winds of 39 mph or more on the Saffir–Simpson hurricane scale. It will become Hurricane Barry if it reaches wind speeds of 74 mph (119 km) as expected when it makes landfall near the mouth of the Mississippi River and just west of New Orleans.

    Louisiana Governor John Bel Edwards declared a state of emergency on Wednesday.

    “The storm system will likely produce storm surge, hurricane force winds,” he said at a news conference. “No one should take this storm lightly.”

    National Guard troops were in place across the state, the governor said.

    U.S. oil producers on Wednesday cut nearly a third of Gulf of Mexico crude output ahead of the storm.

    Fifteen production platforms and four rigs were evacuated in the north central Gulf of Mexico, according to a U.S. regulator as oil firms moved workers to safety.

    New Orleans was already hit with widespread flooding on Wednesday from a weather system that might inundate the low-lying U.S. city.

    The National Weather Service said the city had received 6 to 9 inches (15 to 23 cm) of rain by Thursday morning, causing dramatic flooding in the area, including on Bourbon Street in the city’s historic French Quarter.

    Officials advised residents on Wednesday to stock up on emergency supplies and ordered evacuations in some vulnerable residential areas.

    Reporting by Rich McKay in Atlanta; Additional reporting by Alex Dobuzinskis in Los Angeles, Peter

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