Core inflation in the global economy has been steady over the past few months. Despite a stronger dollar and the low oil prices brought by the oversupply, consumer prices are nonetheless robust.
Core inflation is a closely-watched economic indicator, tracking the movement of prices paid for goods and services daily.
US Core Prices
According to data released by the US Department of Labor, January core prices in the world’s largest economy jumped 2.20% from the same period last year, posting the fastest growth rate in almost four years. From the previous month, January core prices rallied 0.30%, the fastest growth rate since 2011. The gauged consumer prices do not include food and energy.
Central bank policymakers are closely watching the country’s core inflation as further interest rate hikes are set to transpire this year as a part of a gradual increase process.
The strengthening of the US labor market is believed to drive inflation growth as the healthcare and retail sectors have developed an increased work force demand. This has weakened unemployment rate to 4.90%. Moreover, January wages also advanced 2.50% from the same period last year.
However, investors remain worried as the dollar continues to strengthen, holding back import prices. According to the Federal Reserve, weak import prices have a negative impact on its preferred core inflation.
UK, Asia, Europe Core Prices
In UK, core prices for last month surged 1.20% from January, 2015. This excludes alcohol, energy, food, and tobacco.
Europe, on the other hand, saw a 1.0% gain in January core prices excluding alcohol, energy, food, and tobacco.
In Asia, Japan has suffered from extremely low inflation. However, the stabilizing consumer prices have been easing economic woes. In December, Japan’s annual core inflation gained 0.80% from a mere 0.40% boost in April.
The decline in oil and grocery prices has pulled down the overall inflation in January. However, the recent reports have revealed that the boost in core prices were mainly driven by higher service costs.
The unemployment rate in Europe has consistently been declining for about three years. In December, unemployment in the Eurozone was seen at 10.40%. In the third quarter, wages inched up 1.40% year-over-year. Higher wages usually lead to higher consumer prices.