Agencies
In December, US consumer prices experienced their most significant increase in nine months, primarily due to rising energy costs.
The Consumer Price Index (CPI) climbed by 0.4 percent on the month following a 0.3 percent rise in November, with energy products, especially gasoline, contributing notably to this uptick.
Food prices also saw an increase, with egg prices surging due to an avian flu outbreak. Annually, the CPI went up by 2.9 percent, slightly surpassing expectations.
Despite this, core inflation, which excludes food and energy, showed signs of slowing. Core CPI rose 0.2 percent on the month, below the previous 0.3 percent increase, and 3.2 percent annually, better than the forecasted 3.3 percent figure.
As a result, equities rallied, with the S&P 500 rising by 2.9 percent, while the Nasdaq Composite, dominated by technology stocks, surged 2.5 percent. Markets are anticipating a potential rate cut by the Federal Reserve in June.
However, the Fed is expected to proceed cautiously with rate reductions, considering economic resilience and potential inflationary risks from forthcoming tariffs and immigration policies. At its upcoming January meeting, the Fed is likely to maintain current rates.
The December Producer Price Index (PPI) rose 0.2 percent monthly and 3.3 percent annually, lower than economists’ expectations of 0.3 percent and 3.4 percent, suggesting inflation may not be accelerating as feared.
Core PPI, excluding food and energy, remained flat monthly and edged up to 3.3 percent annually. A surge in energy prices, particularly a 9.7 percent increase in gas prices, drove the monthly rise.
Economist Chris Rupkey warned that the positive report might be temporary, with potential inflationary pressures from President-elect Donald Trump’s proposed tariffs on key trading partners, which could increase costs for American consumers. Despite the annual PPI reaching its highest since February 2023, the data signals moderated inflation trends for now.
US initial jobless claims rose by 14,000 to 217,000 in the week ending January 11, 2024, exceeding expectations of 210,000 but remaining below the second-half 2024 averages, reflecting a strong labor market. Outstanding claims fell to 1,859,000, continuing a decline from November’s peak of 1,908,000.
The four-week moving average of claims decreased by 750 to 212,750, smoothing out volatility. Non-seasonally adjusted claims rose by 45,228 to 351,885, with notable increases in California (+13,074), Michigan (+15,175), and Texas (+10,677). The robust labor market supports the Federal Reserve’s hawkish stance.
US retail sales rose by 0.4 percent month-over-month in December 2024, the smallest increase in four months, down from an upwardly revised 0.8 percent in November and below the expected 0.6 percent. Despite the slowdown, consumer spending remained strong. Key gains were recorded in miscellaneous store retailers (4.3 percent), sporting goods (2.6 percent), and furniture (2.3 percent). Increases also occurred in gasoline stations (1.5 percent), clothing (1.5 percent), food and beverage stores (0.8 percent), and motor vehicle dealers (0.7 percent).
However, sales fell in building materials (-2 percent), food services (-0.3 percent), and health stores (-0.2 percent). Core sales, excluding volatile categories, rose 0.4 percent m/m. The US Dollar Index closed the week at 109.347.
The Eurozone’s annual inflation rate rose to 2.4 percent in December 2024, the highest since July, up from 2.2 percent in November and in line with expectations.
The increase was driven by base effects from last year’s energy price declines, with energy costs rebounding (0.1 percent vs -2 percent in November) and service inflation slightly accelerating (4 percent vs 3.9 percent).
Food inflation eased as slower unprocessed food price growth (1.6 percent vs 2.3 percent) offset faster gains in processed food, alcohol, and tobacco (2.9 percent vs 2.8 percent). Inflation rose in Germany (2.8 percent) and France (1.8 percent) but fell in Italy (1.4 percent). Core inflation remained steady at 2.7 percent. The ECB expects inflation to return to its 2 percent target by year-end. The EUR/USD currency pair closed the week at 1.0271.
UK inflation unexpectedly declined in December, fueling expectations of an interest rate cut next month.
Annual price growth slowed to 2.5 percent in December, down from 2.6 percent in November, marking the first decrease in inflation in three months. The drop was largely due to falling hotel prices and smaller-than-usual increases in airfares.
However, inflation remains above the Bank of England’s target. Following the inflation data, investors increased their expectations for an interest rate cut next month, with a second cut anticipated by the end of the year. The Bank of England held interest rates steady at 4.75 percent last month, citing weaker-than-expected economic performance and stagnant growth between October and December.
UK retail sales fell by 0.3 percent month-over-month in December 2024, contrary to expectations of a 0.4 percent increase, following a revised 0.1 percent rise in November. Declines in food store sales (-1.9 percent) were partly offset by a 1.1 percent rise in non-food stores, with clothing sales surging by 4.4 percent and stronger Christmas sales boosting department and household goods stores.
Year-on-year, retail sales rose 3.6 percent. Excluding fuel, sales dropped 0.6 percent on the month but rose 2.9 percent annually.
For Q4, sales fell 0.8 percent compared to Q3 but increased 1.9 percent year-on-year. In 2024, retail sales volumes grew 0.7 percent, recovering from declines of 2.9 percent in 2023 and 4.1 percent in 2022. The GBP/USD currency pair closed the week at 1.2163.
