Instant View: Consumer prices, jobless claims up

New U.S. claims for unemployment benefits rose more than expected last week, according to a government report on Thursday that still pointed at gradual labor market recovery.

KEY POINTS: * The Labor Department said its core Consumer Price Index, excluding food and energy, increased 0.2 percent -- the largest gain since October 2009 -- after rising 0.1 percent in December. * Initial claims for state unemployment benefits increased 25,000 to a seasonally adjusted 410,000, the Labor Department said, partially reversing the prior week's hefty decline.

COMMENTS:

MICHAEL GAPEN, SENIOR U.S. ECONOMIST, BARCLAYS CAPITAL, NEW YORK, NEW YORK:

"The CPI came largely in line with our expectations, although a little bit higher. It was affected by higher commodity and energy prices and as of yet that is not transferring into core. Our view is that core bottomed out in the fourth quarter. It is well below the Fed's mandate. There is a high level of slack and so far that has not passed through to core and we see that as more of a 2012 issue. It is in line with our view that the disinflation process bottomed in the fourth quarter and it will gradually move to the Fed's target in 2011 and 2012. We do not see pricing power being passed along yet."

"Jobless claims has a lot of noise in January because of the turn of the year effect and weather issues. Overall there has been a lot of volatility so reading this is hard. Overall it is in line with our view that the labor market is gradually improving. The drop in unemployment last month confirmed that move. Our view is that unemployment will be at 8.5 percent or little below by end of this year. Recent behavior of jobless claims have shown a gradual improvement in labor market conditions."

T. C. ROBILLARD JR, SENIOR RESEARCH ANALYST AT SIGNAL HILL IN BALTIMORE

"The rise in CPI wasn't that huge, but in this environment everyone is hyper-sensitive to any inflation. So even being a touch higher will have the inflation hawks nervous.

"Claims being about 10,000 above consensus wasn't a huge swing for the week. The four-week average is ticking up a bit, but generally we are getting close to the 400,00 level. We've had a hard time reaching that so far.

"From my standpoint, when I put this with other data out there, it continues to reinforce the idea that things are slowly improving. Not as fast as a lot of people want, but we are improving. We're still in an environment where we take a few steps forward and then one back. So it is progress, but at a slow pace."

STEVEN NEIMETH, MONEY MANAGER AT SUNAMERICA ASSET MANAGEMENT, JERSEY CITY, NEW JERSEY, WHICH MANAGES $9 BILLION:

"It looks like the jobless number was pretty much in line. People aren't likely to focus on that because the poor weather likely created some volatility.

"On the other hand, CPI will likely continue spooking investors who have recently seen inflation creep into the global economy. They're likely to dig deeper into the CPI number to find out what drove it higher than expected. Energy and food are the likely culprits.

"Portfolio managers who have only just started positioning their portfolios for higher inflation are likely to accelerate their moves based on these increasingly higher numbers."

VIMOMBI NSHOM, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS:

On CPI:

"As usual food and energy price gains accounted for majority of the growth (this month roughly 66 percent), pushing overall prices up for the seventh month....Nearly every core item experienced price gains (such as apparel up 1 percent and airfare up 2.2 percent), save for autos, as both new and used vehicle prices fell by 0.1 percent and 0.3 percent respectively."

On claims:

"Despite the recent gain, two prior weeks of declines (down a combined 72,000) helped to anchor initial claim's moving average at 417,750 -- an increase of 1,750. The average will continue to improve into the Spring."

MARKET REACTION: STOCKS: U.S. stock index futures add to losses after the data. BONDS: U.S. bond prices hold steady at higher levels. FOREX: The dollar firms versus euro and yen. U.S. RATES FUTURES: Federal funds futures touch session highs.