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Dismal US data keeps rate hike elusive
September 16, 2016, 4:20 pm

The uneven data about the US economy this summer - and drop in oil prices - has investors scratching their heads about 2016 prospects [Xinhua]

The uneven data about the US economy this summer – and drop in oil prices – has investors scratching their heads about 2016 prospects [Xinhua]

Japan’s Nikkei index closed up 0.70 per cent to 16,519.29 while India’s benchmark Sensex index in Bombay gained 0.66 per cent to close 28,599.03 on Friday buoyed by reports the US economy may not be doing as well as thought and therefore lowering chances of a rate hike.

US August retail sales and manufacturing output fell more than expected amid weak purchases of automobiles and a range of other goods, data from the Federal Reserve showed late Thursday, while consumer prices rose beyond forecasts.

The fall points to cooling domestic demand that continues to diminish, with sales at department stores, notably, down five per cent on the year.

US stocks fell in opening trade on Friday: The S&P 500 fell 0.47 per cent to 2,137.09 at press time, while the Dow Jones Industrial average scaled back 0.34 per cent to 18,151.22.

The Nasdaq slipped 0.17 per cent to 5,240.68. Lower energy prices also played a role amid continuing fears of an oil glut.

Meanwhile, a separate report from the Labor Department showed producer prices, excluding food, energy and trade services, increased 0.3 per cent in August after being level in July.

The core Producer Price Index – which gauges changes in the prices of goods and services sold by producers, excluding food and energy – increased 1.2 per cent in the 12 months through August, after a jump of 0.8 per cent in June.

The total increase makes this the biggest gain since December 2014.

The Federal Reserve could still raise interest rates as inflation pressures gradually firm.

The Federal Reserve has set a two per cent inflation rate as an ideal level to maximize economic growth. In August, the inflation rate was at 0.8 per cent, year on year.

However, a Fed rate hike is beginning to look less likely in September or October as the US services sector hit a 6.5 year low this month after sharp drops in production and orders.

The utilities sector has also witnessed a sharp decline in output, lowering overall US industrial production for the month of August.

Industrial output – which measures the productivity of sectors comprising manufacturing, mining; and electric and gas utilities – fell 0.4 per cent last month after a downwardly revised 0.6 percent increase in July.

Last month, manufacturing output also declined 0.4 percent.

In other Asian markets, Singapore’s STI index rose 0.78 per cent to 2,827.45; Australia’s ASX closed up 1.08 per cent to 5,296.699. Markets in China, South Korea and Malaysia were closed for seasonal holidays.

The BRICS Post with inputs from Agencies

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