Consumer prices are up slightly in both Canada and the U.S. according to reports released this morning. This news, indicating an improving economy should help the markets get off to a positive start.

Statistics Canada is reporting that consumers paid 1.2% more for the goods and services included in the consumer price basket in January 2004 than they did in January 2003. This was the smallest 12-month increase since May 2002, when it was 1%.

However, excluding energy, the drop in the 12-month increase in the CPI was much less significant, falling from 1.7% in December to 1.5% in January.

Energy prices were primarily responsible for the large fall in the 12-month increase in the CPI from 2% to 1.2%. The CPI surged 0.8% from December 2002 to January 2003, mainly because of the return to normal levels for Ontario’s electricity index in January 2003 after a refund was paid to customers in December 2002, and of higher gasoline and natural gas prices.

In the U.S., consumer prices grew in January at the fastest pace in nearly a year as energy and housing costs surged. The consumer price index rose 0.5%, the fastest rate since February 2003, says the Labor Department. Higher energy prices accounted for 75% of that increase. The core index, which excludes food and energy items, rose just 0.2%. Economists had expected a 0.3% gain in the overall index.

Despite the rise in inflation on both sides of the border, analysts don’t expect either of the central banks to rush into raising interest rates, preferring instead to let the respective economies to grow.

In Europe at midday, London’s FTSE100 Share Index gained 17.5 points, or 0.4%, to 4,533.10. In Frankfurt, the Xetra DAX Index slipped 13.24 points, or 0.3%, to 4,128.29. In Paris, the CAC40 Index slipped 2.11 points, or 0.1%, to 3,757.21.

In Tokyo, the Nikkei index slid as investors took profits from the newly listed Shinsei Bank, which sank 9.6% following its 58% surge during its debut Thursday on the Tokyo Stock Exchange. The Nikkei closed down 33.11 points, or 0.31%, at 10,720.69. On Thursday, the index gained 76.99 points, or 0.72%.

In Hong Kong, the Hang Seng Index edged up 1.15 points, or 0.01%, to 13868.37.

On Thursday, the S&P/TSX composite index fell 18.74 points, or 0.21%, to 8,699.09. In New York, the Dow Jones industrial average reversed course after briefly touching a 32-month high, finishing down 7.26 points, or 0.07%, at 10,664.73.

The tech-heavy Nasdaq composite index fell 1.47%, or 30.51 points, to 2,045.96.