CPI rose 0.4% in November; core inflation flat for the month.
Consumer prices are rising and doing so at a moderately accelerating pace. Since reaching a low point of 1.6% in June, the consumer price index has been drifting gradually higher. In November, the CPI reached 2.2%, matching its highest year-over-year pace since last March.
For the month, the CPI rose by 0.4%, in line with expectations. Energy prices were up sharply, rising 3.9% even as food prices were flat. Excluding those two more volatile items, core CPI edged up by just 0.1% in November, falling short of expectations for a 0.2% increase. While headline inflation has been rising since summer, core inflation has been virtually unchanged since May.
There is still a stark contrast in inflationary pressures by category of purchases. The cost of a range of services – accounting for about 60% of the index – continues to grow at a faster pace. Over the past year, service costs have risen by 2.5%. Contrast that with the cost of a variety of goods (outside of food and energy), where prices continue to fall.
From cars to clothes and electronics to home furnishings, prices remain under pressure. Certainly, the continued growth of online shopping and the ability of consumers to easily compare prices between retailers is putting pressure on retailers to cut costs to remain competitive and fight for market share.
Conversely, the cost of a range of services are rising. Shelter costs – the largest component of the index – are up, with rental rates rising by nearly 4%. Costs for transportation, recreation, and a range of other personal services are also trending higher.
As a result, consumers experience inflation very differently, depending on where and how their dollars are being spent.
Although the Fed’s preferred measure for inflation is still below its target, continued growth, tighter labor markets, and gradually rising prices certainly provide the Fed with the impetus to continue to pursue its policy of slow, steady tightening.
With the FOMC announcement coming later this afternoon, a single rate hike is a foregone conclusion, but economists will be looking closely at the language about the coming year and the path of both expected rate hikes and quantitative tightening.
Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.
Data sources for peer group comparisons, returns, and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources believed to be reliable. However, some or all information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis non-factual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes only to reflect the current market environment; no index is a directly tradable investment. There may be instances when consultant opinions regarding any fundamental or quantitative analysis may not agree.
Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.