USA consumer prices increase in December, but underlying inflation remains tame

Darnell Taylor
January 13, 2021

The dip in inflation came primarily on the back of food inflation, which came down from 9.50% in November, to 3.41% in December, the data showed. The CPI-based inflation has held a declining trend over the past few months, declining to 6.93 per cent in November from a six-year high of 7.61 per cent in October.

Meanwhile, India's Index of Industrial Production contracted by 1.9% in November, another set of data released by the government showed.

Mining output also declined 7.3%, while power generation grew 3.5%. "Today's CPI print largely reflects normalization of the inflation picture as the bulk of the inflation spike earlier during H2 2020 came in from surging food inflation, even though prices of industrial commodities and energy were largely anchored reflecting weak demand", Siddhartha Sanyal, Chief Economist and Head of Research, Bandhan Bank said.

The Labor Department said on Wednesday its consumer price index increased 0.4 per cent last month after gaining 0.2 per cent in November.

India’s retail inflation drops to 4.59 % in December
U.S. consumer prices increase in December, but underlying inflation remains tame

Vegetable prices witnessed a 10.4% deflation in December, compared with inflation of 15.5% inflation in November.

Sugar and confectionary prices increased only 0,53 per cent in December, whereas spices got costlier by 10.29 per cent. Inflation in non-alcoholic beverages was recorded at 11.86 per cent and that in prepared meals, snacks, sweets, etc. touched 4.81 per cent.

"With both global and domestic demand expected to strengthen with the roll-out of Covid-19 vaccines, core-CPI inflation may remain relatively sticky, and display a limited correction going forward", Nayar noted. "This may give the RBI some room to cut interest rates, but in our view, the central bank may continue its pause at the February's policy and look out for more incoming data", Gupta said. This is the lowest point in retail inflation since March a year ago, when it was pegged at 5.84 per cent, marking a return to the comfort range of 2-6 per cent prescribed by the Reserve Bank of India for the first time in nine months. "Food prices drove the softening in inflation".

Analysts in a Reuters poll had predicted an annual inflation at 5.28% for the month.

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