What’s going on here?
Data out on Wednesday showed that US prices crept up by more than expected last month.
What does this mean?
Economists weren’t completely blindsided by August’s hot inflation figures. After all, the rising cost of oil has sent the price at the pump skyward, so they were already expecting the headline inflation number to tick up again. But that doesn’t mean pundits had it all figured out. For one, consumer prices’ 3.7% growth – well above July’s 3.2% – was heftier than they predicted. And for another, the all-important core inflation rate (which strips out the volatile food and energy costs) wasn’t exactly the saving grace that economists crossed their fingers for. Granted, the yearly measure of the metric fell to 4.3% from July’s 4.7%. But the month-on-month jump was bigger than expected, accelerating for the first time since February.
Why should I care?
For markets: Never say die.
The inflation numbers weren’t exactly ideal, but it’s not all doom and gloom. Sure, there’s chatter that the US’s economic revival might fan the inflationary flames – but considering muted wage growth and a cooling jobs market in recent months, many are betting the Federal Reserve won’t hit the panic button just yet. And the market reaction’s actually been pretty chill too. Traders, at any rate, seemed generally unfazed by the news, still betting that the central bank will avoid hiking interest rates in its meeting next week.
Zooming out: Price and shine.
While the US is grappling with price rises, China’s celebrating them. Data out late last week showed a modest 0.1% climb in China’s consumer prices last month. And while that may sound tiny, it’s a win after the previous month’s deflationary dip. Plus, with credit demand looking perkier too, this adds to the evidence that China’s economy might be on firmer footing again, after its recent sharp downturn.