Manufacturing, capital & consumer goods push IIP growth to 7.5%

Manufacturing, capital & consumer goods push IIP growth to 7.5%

In February, consumer food price index softened to 3.26 per cent as against 4.7 per cent in January.

Economists surveyed by the Wall Street Journal expected consumer prices to rise 0.2% in February, and core prices to rise 0.2%.

Excluding food and fuel prices, which can see big swings, the index also gained 0.2 per cent for the month, with noted gains in the prices for vehicle insurance, rent and apparel.

Note that in 2013, 2016 and 2017 a core rate of 0.3% was reported for January - without inflation increasing on a sustainable basis. Volume is low as investors prepare for a week of major economic reports including consumer inflation, producer inflation, retail sales and building permits.

The S&P 500 and the Dow slipped on Monday as the US tariffs signed into law last week weighed on industrials, while a rise in tech stocks boosted the Nasdaq to a new record high.

"Solid domestic economic momentum and the impulse from oncoming fiscal stimulus will underpin a gradual build in inflation toward the Fed's 2 percent target", said Gregory Daco, chief economist at Oxford Economics in NY.

Other areas that frequently see price hikes were not showing inflationary pressure in February.

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Capital goods, a barometer of investments, showed a sharp increase in output by 14.6 per cent in January 2018, against a decline of 0.6 per cent a year ago.

US consumer prices increased at a modest pace in February, underscoring that inflation pressures appear to be muted for now. Over the past 12 months, food prices are up 1.4%. Owners' equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, increased 0.2 percent last month after advancing 0.3 percent in January. It then grew by 7.06 per cent in December and by 3.5 per cent in January 2017.

India's factory output grew at a robust pace for the third straight month, at 7.5% in January, while retail inflation surprisingly slowed for the second consecutive month to 4.4% in February, signalling that the economy may be set on a strong recovery path.

The January IIP was also boosted by a higher offtake of consumer and capital goods.

Fed policy makers have penciled in three rate increases this year, and have been monitoring the inflation picture closely, looking for signs that a tightening labor market and continued economic growth are generating stronger wage and price increases after years of weak inflation. The strength of the 30-year reopening in spite of the $1 billion increase in supply suggests firm demand for long-dated bonds, and spurred additional bond buying in the open market. In all 16 out of 23 industry groups in the manufacturing sector showed growth in January.

The general index for the month of January 2018 stood at 132.3, thus registering a 7.5 percent growth as compared to January 2017.

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