Report: Inflation Expected To Be Subdued In 2016

Subdued inflation pressure over the coming year is the conclusion of the monthly national activity report where the index came in at minus 0.30 in November, below a downward revised minus 0.17 in October and below the low-end Econoday forecast. The negative reading is consistent with below average economic growth, in a reminder that the Fed is raising rates at a time when the economy is far from booming. The 3-month average is at minus 0.20, only marginally improved from October's revised minus 0.25.

Weakness in exports is a key negative right now for the economy, underscored in a very sharp decrease for the production component to minus 0.27 from minus 0.11. Much of this decline, however, likely reflects the weather-related slowdown in utility output. The consumption & housing component pulled down the index by minus 0.06 points, which however is improved from October's minus 0.11, while sales/orders/inventories came in little changed at minus 0.02. The only one in the positive zone is employment though this component did slow to plus 0.05 from 0.08.

Recent History Of This Indicator:
November was a solid month for employment and housing but factory data proved weak and consumer spending uneven. Still, forecasters see the national activity index coming in the plus column, at 0.15 to signal an above average monthly performance.