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Hurricanes could boost inflation and retail sales

Key Points
  • September CPI and retail sales data could both see a jump higher due to the impact of Hurricanes Harvey and Irma.
  • Gasoline prices could drive CPI higher and boost retail sales, which would also have been lifted as consumers in hurricane hit areas restocked and purchased building materials.
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Hurricanes Harvey and Irma left trails of destruction, but they could have given a boost to September retail sales and consumer price inflation.

Both the retail and inflation reports are due to be released at 8:30 a.m. ET Friday.

Retail sales are expected to rise by 1.7 percent, but, excluding gasoline and autos, the increase is expected to be 0.4 percent, according to Thomson Reuters. Auto sales surged in September as consumers replaced flooded and storm-damaged vehicles to an annualized pace of 18.5 million, the best this year.

The consumer price index is expected to rise 0.6 percent, or 2.3 percent year over year.

"I think the hurricane effects are playing out here. We saw the PPI report was quite strong, even on the core number. It's being driven by an increase in gasoline prices. We'll see a similar effect on consumer prices," said Scott Anderson, chief economist at Bank of the West.

Anderson said retail sales were lifted also by stockpiling of goods by consumers in storm-hit areas.

"There was weakness in retail sales in the last two months, so we think there's going to be a bounce back," he said.

The impact from the storms is expected to be temporary, but the Fed noted the higher inflation numbers could last several months.

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