Inflation fears recede in US

Further evidence of a revival in the American economy, with no sign yet of higher inflation, helped US financial markets bounce back yesterday.

New figures showed retail sales barely rose in March but this was entirely because of huge upward revisions to February's sales figures.

Sales grew 0.1 per cent last month after climbing 1.9 per cent in February - the biggest jump for nearly three years. Their average annualised growth rate during the first three months of this year has been well over 8 per cent.

Yet headline consumer price inflation dipped, falling to 2.8 per cent from 2.9 per cent in February despite big increases in food and energy prices. The price level rose 0.4 per cent, and the "core" index, excluding food and energy, increased 0.3 per cent.

March's jump in food prices was the highest for more than a year. Bad weather has driven up grain and vegetable prices. A Florida freeze hit tomatoes, storms affected lettuce crops in the South West and lack of rain in the Mid-West means stocks of corn and wheat have fallen perilously low.

Similarly, the harsh winter has depleted oil stocks and sent prices to their highest level since the gulf war.

The general level of food prices paid by consumers increased 0.6 per cent during March, with fresh vegetables up a dramatic 10 per cent during the month. Energy costs climbed 1.4 per cent.

"People have taken a relaxed view of these increases on the basis that they will be short-lived," said Mark Cliffe, an economist at securities firm HSBC Markets.

A Labor Department economist, Patrick Jackman, said: "I don't think it will get out of hand."

There were declines in some other prices, notably a 1.9 per cent drop in airline fares

The market reaction to the buoyant retail sales was more surprising in the light of Wall Street's recent dives on the slightest concern about future inflationary pressure.

A drop in the University of Michigan's consumer sentiment index between March and April contributed to yesterday's calm. The index fell to 90.8 from 93.7 last month.

Analysts said fears that the Federal Reserve would decide to raise key interest rates were receding. "The Fed would need more evidence of faster growth and an uptick in inflation before they act. My guess is that it will want to do nothing this year," said Brian Fabbri, an economist at Paribas Capital Markets on Wall Street.

By mid-afternoon, the Dow Jones index was up 40.46 to 5,527.53, despite a sharp fall in one of the biggest stocks, IBM. The benchmark 30-year Treasury bond had gained a third of a point, taking its yield down to 6.84 per cent from 6.92 per cent.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Life and Style
Suited and booted in the Lanvin show at the Paris menswear collections
fashionParis Fashion Week
Arts and Entertainment
Kara Tointon and Jeremy Piven star in Mr Selfridge
tvActress Kara Tointon on what to expect from Series 3
Voices
Winston Churchill, then prime minister, outside No 10 in June 1943
voicesA C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
News
i100
News
An asteroid is set to pass so close to Earth it will be visible with binoculars
news
Arts and Entertainment
Benedict Cumberbatch has spoken about the lack of opportunities for black British actors in the UK
film
News
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Recruitment Genius: Outbound Sales Executive - OTE £25,000

£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Java Developer / J2EE Developer - Watford - £45,000 - £47,000

£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...

Ashdown Group: Marketing Product Manager - (Financial Services) - SW London

£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project