US consumer prices post first drop in 13 months

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The Commerce Department said retail sales dropped 0.2 % last month after a 0.3 % decrease in February, which was the first and biggest decline in almost a year.

Consumer prices retreated by 0.3% last month in comparison to February, dragging the annualised rate of gains from 2.7% to 2.4%, according to the Bureau of Labour Statistics.

In addition, the report stated price movements recorded by All Items less farm produce or Core sub-index rose by 15.40 per cent (year-on-year) in March.

Excluding the volatile food and energy components, core CPI slipped 0.1%, versus to a 0.2% expected gain.

February. As a result, the year-on-year increase slowed to 2.0 percent.

Measures of inflation closely watched by U.S. central bankers have been rising slowly since mid-2016 and the Fed has twice raised its benchmark interest rates since December to prevent inflation from getting too far beyond its two percent target. Compared to March previous year retail sales increased 5.2 %.

But with the labor market near full employment, the decline in sales and consumer prices reported by the government on Friday is likely temporary and probably does not change expectations that the Federal Reserve will raise interest rates again in June.

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The Food Index increased by 18.44 percent (year-on-year) in March, slightly down 0.09 percent points from rate recorded in February (18.53) percent driven by increases in the prices of bread, cereals, meat, fish, potatoes, yams and other tubers and wine, while the slowest increase in food prices year on year were recorded by Soft Drinks, Fruits, Coffee, Tea and Cocoa. "So we will be looking for a clear rebound in April".

The U.S. central bank lifted its overnight interest rate by a quarter of a %age point in March and has forecast two more hikes this year.

Consumers say they're optimistic about the economy and willing to spend their hard-earned dollars, but a duo of consumer data out Friday morning showed as prices dipped in March, actual spending didn't quite keep up with sentiment. This is the first monthly decline in consumer price in 13 months. Sales for motor vehicle and parts dealers in the first quarter of 2017 are 5.4 percent higher than the same period past year and up one percent over the prior quarter.

The few bright spots were a 2.6% rise in takings at electronics and appliance stores and a 1% rise in clothing sales.

The report also said core producer prices came in unchanged in March following a 0.3% increase in February. Overall housing costs rose just 0.1 percent, the smallest advance in a year.

Jim O Sullivan of High Frequency Economics said the details in March sales were more encouraging than the headline numbers.

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