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December 11, 2019 Blog 1 min read
Consumer prices increased by 0.3% in November, modestly exceeding expectations.
12-11-19 CPI ChartThe consumer price index (CPI) increased 0.3% in November from the prior month, a result that was modestly above expectations. Excluding the usually more volatile food and energy prices, core CPI rose by 0.2% in November as expected. Over the past twelve months, headline CPI increased by 2.1%, while core CPI came in at a slightly higher 2.3%.

Energy costs surged in October and were up by a brisk 0.8% again in November. Despite those prices perking up, energy remains down 0.6% over the past year. That factor alone largely explains the softer results in the core index.

The report is timely given the Fed’s scheduled policy announcement set for later today. On the heels of three rate cuts since August, the Fed already appeared unlikely to trim rates given recent evidence that the economy may be firming. With core inflation now pushing higher, the need for the Fed to provide additional accommodation is fading even further.

Pressure on consumer prices could intensify if threatened tariffs on a wide range of imported consumer goods from China are actually implemented in the days ahead. That remains far from certain, as negotiations on an incremental agreement with China are ongoing. It’s one additional risk, but one that is not likely to be meaningful in the Fed’s decision.

The good news is that the Fed’s pivot in recent months provided much needed reassurance that the central bank was willing to quickly reverse course rather than continuing to tighten, and in doing so risking completely choking off growth that was already faltering. That has been music to investors’ ears.

It’s too soon to conclude that the economy is definitively out of the woods, but it increasingly appears that it is emerging from its latest soft patch. Labor market conditions remain quite strong, and the manufacturing sector – hit particularly hard by the trade war – appears to be stabilizing.

With year-over-year inflation measures now at or near their highest levels of 2019, it’s increasingly likely that the Fed will stand pat. The economy appears well positioned to find its footing and extend the expansion into 2020, and potentially beyond.
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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.