Dec IIP at 7.1%; Jan CPI at 5.07%

India’s retail inflation in January slowed to 5.07% as food inflation softened

Separately, a report showed USA retail sales decreased 0.3 percent last month, the biggest fall in almost a year and a surprise drop compared with economists' expectations of a 0.2 percent rise.

Inflation has been scaring the markets, and investors have been bracing for a CPI report Wednesday that could send interest rates flying and stocks diving.

Piers Curran, head of trading at Amplify Trading, said a lot depends on Wednesday's release of consumer prices data in the U.S. Stocks on Wall Street opened lower before erasing losses.

The highest increases were recorded in prices of fuel and lubricants for personal transport and transport equipment, vehicle spare parts, accommodation services, maintenance and fix of personal transport equipment, appliances articles and products for personal care.

That would slow economic growth. "Overall, we expect these forces to combine to temper the rate at which inflation falls back towards 2% over the next three years, with the risk that the overshoot proves more protracted".

"The Fed's job now is to prevent the economy from overheating", said Gus Faucher, PNC chief economist. Last week, amidst the volatility chaos, the focus among investors was on central banks, notably, the Bank of England.

The 1.7 percent monthly gain in apparel prices, which account for about 3 percent of the CPI, was the biggest since 1990. Headline CPI rose by 0.5% and core CPI (minus food and energy) by 0.3%.

USA stocks opened lower as fears of firming inflation intensified after a report showed consumer prices in January rose faster than expected. It was up 1.8 percent from a year earlier, higher than the 1.7 percent estimate.

The core CPI is viewed as a better measure of underlying inflation trends. The General Index for December 2017 stands at 130.3, which is 7.1 per cent higher as compared to the level in December 2016.

FILE PHOTO: A woman shops at an H&M store in New York City, U.S. December 23, 2017.

Joseph Song, U.S. economist at Bank of America Merrill Lynch, who had been correct in saying there could be an upside surprise in the January wage number, said, "We're looking for a gradual pickup in inflation this year".

There is also a roughly 50% chance of a further increase in rates to 1% by the end of the year - a level last seen in 2009.

Rising inflation could hurt consumer spending, which is already showing signs of slowing.

As far as retail inflation is concerned, it also little cheered the common man by declining to marginal 5.07 per cent in January.

Mining activity's growth remained subdued at 1.2 percent in December, following November's trend, as compared with a robust growth of almost 11 percent a year ago. Stocks and bonds, however, could be vulnerable to strong inflation data.

If Tuesday's ONS figures match forecasts, it would mark the second drop for consumer inflation since June.

"Consumers can make up for lost time", said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto. Fed officials are looking for clues about whether or not wage growth will continue to accelerate, and eventually put upward pressure on consumer prices, as they contemplate raising interest rates several times this year under new Chairman Jerome Powell. They were higher by about 0.5 percent ahead of the report.

The core CPI was boosted by rising rents. Whilst increased global demand could offer some support to the price, WTI is in a correction phase, after having dropped over 10% from its recent peak.

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