- The CPI Ex Food & Energy for January rose .3% versus estimates of a .2% gain and a downwardly revised .1% increase in December.
- Leading Indicators for January rose .1% versus estimates of a .2% increase and an upwardly revised .6% gain in December.
BOTTOM LINE: Consumer prices in the US rose slightly more than estimates last month, Bloomberg reported. The cost of medical care rose .8% versus a .2% increase in December. The cost of tobacco products increased 3.1%, the most since June 2002. Gasoline prices fell 3%, fuel oil costs declined 5.6% and natural gas prices fell 3%. New vehicle prices were unch. and food prices rose .7%. The CPI year-over-year rose 2.1%, down from 4.7% in September 2005 and well below the 20-year average of 3.1%. The 10-year yield is only 2 basis points higher on the report. I continue to believe inflation worries have peaked for this cycle and inflation will rise below average rates for the entire year.
A gauge of the future direction of the US economy rose for a second month in January, the first back-to-back gain in a year, lifted by an increase in a measure of consumer sentiment, Bloomberg said. Money supply growth, low initial jobless claims and a rising stock market also propelled the index. An expanding job market and higher stock prices are boosting consumer spending. I suspect US economic growth will come in below average levels this quarter as inventory de-stocking has been extensive. However, this should help boost economic growth back to around average levels of 3% the remainder of the year.
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