CPI Logs Surprise Fall In April; Output Rises In Industrial Sector

Prices paid by American consumers fell last month for the first time in almost a year while manufacturing rebounded, according to government reports that suggest the Federal Reserve will stick to a course of gradual interest-rate increases.The consumer price index unexpectedly fell 0.1% last month, led by a drop in energy prices, the Labor Department said yesterday in Washington. Industrial production rose 0.4%, twice as much as expected, in May and manufacturing in New York state rebounded this month, according to reports from the Fed.The central bank “keeps moving at their measured pace,” said James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Conn. “They can stay measured because inflation is still tame, but they have to keep moving because growth is running above trend and rates are too low to prevent inflation from accelerating.”Factory production increased in May at the fastest pace since October, according to the data, and energy prices rose since last month. Fed Governor Donald Kohn said yesterday that the Fed’s policy is “still accommodative” and low long-term interest rates pose a risk to the economy, suggesting the central bank will keep raising its target rate. The yield on the benchmark 10-year Treasury rose to the highest since May 17.The Fed said in a separate survey yesterday that “overall price pressures were moderate.” In the report, commonly known as the beige book for the color of its cover, the Fed said most of areas of the country showed expanding manufacturing. It reported that consumer price increases “remained modest.”Core consumer prices, which are less volatile because they exclude energy and food, rose 0.1% in May after no change a month earlier. So far this year, consumer prices are rising at a 3.7% annual rate compared with a 5% increase at the same time last year. Core prices are rising at a 2.4% annual pace, down from a 2.5% rate.Economists predicted no change in the consumer price index, according to the median estimate of 69 economists surveyed by Bloomberg. The core rate was forecast to rise 0.2%.

CPI Logs Surprise Fall In April; Output Rises In Industrial Sector

CPI Logs Surprise Fall In April; Output Rises In Industrial Sector

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