- Consumer prices rose 0.2% month/month in November, one tick above expectations. Total CPI was up 1.2% year-on-year in November, unchanged from October.
- Core inflation was also up 0.2% in November, after remaining unchanged in October. As a result, core inflation was up 1.6% on a year/year basis, unchanged from the prior month.
- Within core inflation, the shelter index rose a modest 0.1% month/month for the fourth month in a row. However, that gain was driven entirely by a rebound in prices for lodging away from home, which rose 3.9% m/m in November after falling 3.2% in October. Other price rebounds were seen in household furnishing and operations (+0.7%), apparel (+0.9% m/m) and motor vehicle insurance (+1.1% m/m). Another notable price increase was a 1.8% m/m gain for transportation services, boosted by a 3.5% increase in airline fares in November. However, airline fares remained 17% below their year-ago levels.
- Prices fell for both new (-0.1% m/m) and used (-1.3% m/m) vehicles. Used vehicle prices experienced a large spike in prices over the summer months, and are still up 10.9% year/year.
- Zooming out from all those monthly moves, price pressures for core goods and services continued to trend in opposite directions. Core services prices rose 0.2% m/m in November, a pick-up from October. However, on a year/year basis, core services inflation was only 1.7%, the softest pace since 2011. On the other side of the coin, core goods inflation was up 0.1%, and is now +1.4% year/year in October, the fastest pace since early 2012.
- Energy prices picked up a bit, rising 0.4% on the month in November, and are still down 9.4% versus a year ago. Food prices fell 0.1% m/m in November, but still remain 3.7% higher than a year ago.
- In-person data collection continued to be suspended by the Bureau of Labor Statistics in October. Response rates remain lower than they were a year ago, but improved slightly from October.
Key Implications
- While there are still a lot of sizeable month-to-month price swings given the pandemic, overall inflation pressures remained reasonably benign in November. It’s true that core inflation did move up a tick, but remained subdued overall.
- So far in the pandemic, prices for core goods have accelerated while core services inflation has eased. Core services prices, which account for about 60% of the consumer basket, did pick up on the month in November, and we will be watching closely to see if this move is sustained. Overall, with unemployment still high, we expect economy-wide inflation pressures to remain contained over the next couple of years.
