Updated May 22 at 5:40pm

Improving U.S. growth lifts inflation as claims drop

An improving U.S. economy is underpinning inflation, limiting firings and lifting consumers’ moods, brightening the outlook for growth at the start of 2014. More

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Improving U.S. growth lifts inflation as claims drop

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WASHINGTON – An improving U.S. economy is underpinning inflation, limiting firings and lifting consumers’ moods, brightening the outlook for growth at the start of 2014.

The consumer-price index rose 0.3 percent in December, the biggest gain in six months, as fuel and rents climbed, figures from the Labor Department showed today in Washington. Claims for jobless benefits dropped last week to the lowest level since November, the Bloomberg Consumer Comfort Index’s monthly expectations gauge improved to a five-month high and manufacturing picked up in January, other reports showed.

The expansion “is gaining speed and breadth at the same time, which makes it more sustainable,” said Joe Carson, director of global economic research at AllianceBernstein LP/USA in New York. “We’re now seeing consumption, housing and investment all moving in the same direction, along with exports. That’s a very favorable backdrop.”

Companies are starting to gain pricing power as rising employment, stocks and home values help boost household wealth and spending. A pickup in inflation toward the Federal Reserve’s 2 percent goal and faster growth mean the central bank’s unprecedented stimulus is paying off, which would allow policy makers to keep reducing the pace of monthly asset purchases.

“Modest, stable inflation is good for the economy,” said David Berson, chief economist for Nationwide Insurance in Columbus, Ohio. “This is exactly what we want to see.”

Shares drop

Stocks fell, after the Standard & Poor’s 500 Index closed at a record yesterday, as Best Buy Co. reported lower sales and earnings at companies from Citigroup Inc. to CSX Corp. disappointed investors. The S&P 500 decreased 0.3 percent to 1,843.07 at 12:18 p.m. in New York.

The increase in consumer inflation last month matched the median forecast of 87 economists surveyed by Bloomberg. Estimates ranged from unchanged to a gain of 0.4 percent.

U.S. economic growth, consumer price index, Labor Department, Bloomberg Consumer Comfort Index, National Association of Home Builders,
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