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U.S. retail sales, consumer prices dip

U.S. retail sales, consumer prices dip

Prices had fallen 0.3 per cent in March.

Now, household finances are under pressure again as the collapse in the pound since the Brexit vote - increasing the cost of imports - helps drive up inflation. While some of the drop in monthly retail sales reflected lower gasoline prices, which weighed on receipts at service stations, details of the report were generally weak.

The rise in the cost of living has been driven by an increase in the price of recreational and cultural goods and services - including holidays overseas - which overall rose 0.9 per cent between April and May compared with a fall of 0.4 per cent a year earlier.

Airline prices also fell by 6.4 per cent month on month, after the effect of Easter travel boosted air fares in April.

Sunil Kumar Sinha, Principal Economist, India Ratings & Research, said though inflation is going to remain low and well within the comfort zone of RBI, probability of large policy rate cut is low.

Amit Kara, head of United Kingdom macroeconomic forecasting at National Institute for Economic and Social Research (NIESR) said: "We expect inflation to rise further over the course of this year and to reach a peak in the final quarter of 2017".

This is a 0.2% increase on April's figure, with the falling cost of motor fuels failing to offset the rising cost of food, energy and recreational goods.

This is despite 74.8% of people aged 16-64 being in work, 109,000 more than in the three months leading up to January, and 372,000 more than a year earlier.




Without taking inflation into account, wage growth including bonuses slowed to 2.1% and earnings excluding bonuses rose by 1.7%.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product and were previously reported to have increased 0.2 percent in April.

According to official data, retail inflation slumped to a record low of 2.18 per cent in May. The Fed said on Wednesday it expected annual inflation rates to "remain somewhat" below 2 percent in the near term but stabilize around the central bank's target over the medium term.

Wall Street was expecting a mild 0.1% rise overall and a 0.2% increase outside the stalling auto sector.

The dollar is plunging on Wednesday following the release of disappointing economic data.

Last month, rental costs increased 0.3 per cent, matching April's gain.

"Although the headline inflation figure has risen again we do think it may have finally reached its peak", he said Nathan Sweeney, an investment manager at Architas.

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