Newspaper article International New York Times

At Last, Some Data to Please the Fed ; after Slow Start This Year, Higher Inflation and Job Growth Help Lift Outlook

Newspaper article International New York Times

At Last, Some Data to Please the Fed ; after Slow Start This Year, Higher Inflation and Job Growth Help Lift Outlook

Article excerpt

A rise in consumer prices and other data suggest that a broader economic firming is underway after a weak, weather-plagued start to 2014.

The Federal Reserve finally seems to be getting what it wants.

Two indicators of economic health that the Fed and its chairwoman, Janet L. Yellen, have identified as keys to a stronger recovery -- modestly higher inflation and a more robust job market - - finally seem to be moving in the right direction, according to new data released by the government on Thursday.

In particular, economists said, a rise in the Consumer Price Index in April along with several other reports in the past week suggest that a broader economic firming is underway after a weak, weather-plagued start to 2014.

Besides the increase in consumer prices reported on Thursday, data Wednesday on producer prices showed a rise of 0.6 percent last month, the largest increase since September 2012 and an indication that demand for a number of basic goods is growing faster than economists expected.

At the same time, a survey of small-business optimism on Tuesday showed sentiment at its best level since before the recession began in December 2007.

"It's not just the C.P.I.," said Ian Shepherdson, chief economist at Pantheon Macroeconomics. "We've had loads more data showing the same thing, and it's good news because the fear at this time last year was excessively low inflation or even deflation."

These nascent signs of a rebound in the United States stand in stark contrast to the economic landscape in Europe, where many countries are struggling to grow at all, and stagnation, deflation and high unemployment remain menaces.

Although preventing higher inflation has long been the traditional concern for central bankers, and many remember it as a serious problem from the 1970s, the Fed has been more worried in recent years about the risk of stagnant prices, which reflect an economy struggling to recover from the financial crisis and recession.

As recently as last month, in a speech in New York, Ms. Yellen warned that the danger of too little inflation still outweighed the risks posed by too much. But even as the Fed's preferred inflation gauge remains contained, the new data from the Labor Department on Thursday, including a 12-month rise in consumer prices of 2 percent, suggests inflation is moving within shouting distance of the Fed's target.

A separate Labor Department report on Thursday put new claims for unemployment insurance in the week ending May 10 at their lowest level since May 2007, the latest in a series of indicators suggesting a healthier labor market, including the upswing in payrolls reported by employers last month.

The American economy is still emerging from a very slow patch. The first estimate for the growth rate of the economy last quarter showed that output expanded at a rate of just 0. …

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