Harvey Pushes Up September Inflation, but Apparel Prices Flat

On Friday, the Commerce Department said U.S. Retail Sales rose 1.6 percent, less than the 1.7 percent traders expected. It is the biggest annual increase since a 3.6 percent rise in 2012.

Consumer prices (CPI) were also higher, with rising petrol prices accounting for much of the increase in this measure of inflation.

US retail sales recorded their biggest increase in 2-1/2 years in September as demand rose for building materials and motor vehicles in areas hurt by hurricanes.

The lower monthly core CPI partly reflected a drop back in vehicle and drug prices that are unlikely to be sustained in the months ahead, said Michael Pearce at Capital Economics, so the September CPI report "is unlikely to stop the Fed hiking rates again in December". Separate reports on Friday showed USA consumer sentiment unexpectedly surged to a 13-year high in October and retail sales rose last month by the most in more than two years as Americans replaced storm-damaged cars and paid higher prices at the gasoline pump. The increase in petrol prices was the largest since June 2009 and followed a 6.3 per cent advance in August. But that hasn't fully translated directly into higher USA consumer prices, in part because technology is allowing Americans to find lower-cost products and wage pressures remain largely in check.

Gold prices were little changed amid a steady dollar on Friday, halting a five-day rally as investors wait for key USA inflation data for clues on the outlook for potential hikes in US interest rates.

Adding to the debate, the University of Michigan's survey of consumers showed consumer's inflation expectations over the medium term slipped in early October.

When excluding volatile food and energy costs, so-called core prices increased 0.1%. Many analysts believe that the Fed will raise rates again in December. Sterling was last trading at $1.3261, up 0.30 percent on the day.

There were also decreases in the cost of medical care, apparel, and household furnishings.

"Hurricane effects are clearly visible - higher gasoline prices boosted gasoline station sales and strength can also be seen in other components as it is likely that there was some uplift as households start to replace lost items", said James Knightley, chief worldwide economist at ING.

September's increase in retail sales was the largest since March 2015.

Platinum was 0.8 percent higher at $935.49 an ounce, after hitting a more than two-week high earlier in the session.

The pick-up in core retail sales suggests the drag on the economy from the hurricanes will probably be modest. The Atlanta Fed raised its third-quarter GDP growth estimate by two-tenths of a percentage point to a 2.7 percent pace after the data.

The increase in the CPI was broadly in line with the expectations of economists.

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