* New jobless claims jump by 32,000 to 360,000 in April
* Consumer price index slips 0.4 percent, biggest drop since
* Philly Fed business activity index drops to minus 5.2 in
By Luciana Lopez
NEW YORK, May 16 U.S. Treasuries prices rose on
Thursday after data raised questions about the strength of the
U.S. economy, including the struggling labor market, fueling
speculation the Federal Reserve will keep its easy money spigot
open for now.
Initial claims for state unemployment benefits jumped by
32,000 to a seasonally adjusted 360,000, the Labor Department
said on Thursday - the biggest jump since November.
Adding to the picture of weakness, factory activity in the
U.S. mid-Atlantic region contracted in May as new orders fell to
the lowest level in almost a year.
The data came a day after another report showed activity in
New York state's manufacturing sector unexpectedly contracted in
May, as well.
"Based on the incoming information today, I think the Fed
remains quite accommodative," said Tanweer Akram, senior
economist with ING U.S. Investment Management in Atlanta,
"Fed officials may have discussed exit strategies, but
that's not an immediate exit plan."
Data also showed inflation is well contained, with U.S.
consumer prices slumping in April by the most in over four
The benchmark 10-year note gained 18/32 in price
to yield 1.877 percent, compared with 1.94 percent late on
The 30-year bond traded 1-11/32 higher to yield
3.090 percent compared with 3.1576 percent late on Wednesday.
Investors are now trying to figure out when the U.S. Federal
Reserve could slow or even stop its easing program as the
The Fed is buying $85 billion per month in Treasuries and
mortgage-backed securities in a bid to prop up the economy and
But recent data have painted a mixed picture, with
encouraging jobs figures interspersed with data showing a
still-struggling manufacturing sector.
Still, with inflation pressures absent, some analysts say
the Fed has little cause to worry that its policies will boost
consumer prices beyond the central bank's target of 2 percent
"We should see more disinflation. We should see lower CPI
readings," said Craig Dismuke, chief economic strategist at
Vining Sparks in Memphis, Tennessee.
"I think the Fed has to pay attention on this. This muddles
the argument on asset purchases," he added.
The containment of price pressures could give monetary
policymakers scope to focus on the employment side of their dual
mandate. With the unemployment rate still a full percentage
point above the 6.5 percent the Fed wants to see, the labor
market could remain a source of concern.
"We don't doubt that conditions will strengthen later in the
year, but if it is a summer swoon, don't look for the Fed to
talk tapering QE any time soon," said Chris Rupkey, chief
financial economist at the Bank of Tokyo-Mitsubishi in New York.