Consumer prices steady as Fed weighs QE taper

Fed’s Bullard

St. Louis Fed President James Bullard, a supporter of the record stimulus, has said the low levels of inflation should mean any reduction in bond buying will be modest until the employment outlook brightens.

Employers added 203,000 jobs in November after 200,000 a month earlier, and the jobless rate fell to a five-year low of 7%, Labor Department figures showed on Dec. 6.

“A small taper might recognize labor-market improvement while still providing the committee the opportunity to carefully monitor inflation during the first half of 2014,” Bullard, a voter on policy this year, said last week in St. Louis. “Should inflation not return toward target, the committee could pause tapering at subsequent meetings.”

In the U.K., inflation unexpectedly slowed in November to the least in four years and moved closer to the Bank of England’s 2% target. Consumer prices rose 2.1% from a year earlier compared with 2.2% the previous month, the Office of National Statistics said today in London.

Core Inflation

Today’s U.S. Labor Department report showed the core measure of inflation, which strips out food and fuel costs that are volatile month to month, rose 0.2% in November from the prior month. The core CPI climbed 1.7% from November 2012, matching the gains in the previous two months.

Estimates of the 83 economists for the overall CPI ranged from a drop of 0.1% to a gain of 0.2% from October, according to the Bloomberg survey. Economists projected the core gauge would also increase 0.1%.

Energy costs fell 1% from a month earlier. Cheaper gasoline has given U.S. households the wherewithal to spend more on other goods and services. The average cost of a gallon of regular gas declined to $3.23 as of Dec. 15 from $3.39 on Oct. 1, according to AAA, the biggest U.S. motoring group.

Retail sales in November rose 0.7%, the most since June, after a 0.6% advance in October, according to a Commerce Department report on Dec. 12. Figures on Dec. 16 from the Fed showed the demand is leading to increased industrial production.

Factory Production

Factory output climbed 0.6% in November after a 0.5% gain, according to the Fed report.

To help spur demand during the busiest shopping period of the year, American Eagle Outfitters, the Pittsburgh-based apparel company, is among businesses reducing prices.

“We continue to operate in the most challenging sector of retail where there has been intense promotional competition and tepid consumer spending,” Chief Executive Officer Robert Hanson said on a Dec. 6 earnings call. “Sales have been promotionally driven, which is pressuring margins.”

Clothing prices in November declined 0.4% after 0.5% decreases in each of the previous two months, today’s Labor Department data showed. New-vehicle prices fell 0.1% for a second month, while home furnishing costs also declined.

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