• Consumer prices rose 0.1% MoM and 3.1% YoY

• Core CPI rose 0.3% MoM and remained at 4.0% YoY

• Core services inflation firmed in November

• Core goods prices declined for a sixth-consecutive month

• The sticky inflation data pushed the prospect of Fed rate cut further out toward the middle of next year

US inflation showed that price increases remained moderate in November, the latest sign that inflation has cooled substantially from its June 2022 peak. That’s likely to keep the Federal Reserve on track to leave interest rates unchanged at its final meeting of the year, which takes place this week.

The overall Consumer Price Index (CPI) rose a scant 0.1% MoM in November thanks to lower oil prices, but another key measure of inflation showed higher costs of other goods and services such as rent and used cars. The annual rate of inflation slowed to 3.1% in November from 3.2% in the prior month, matching the lowest level since early 2021. Energy prices were a key factor restraining the headline measure. A 2.3% MoM decrease in energy prices helped keep inflation in check, as gasoline fell 6.0% and fuel oil was off 2.7%. Food prices increased 0.2% MoM, boosted by a 0.4% jump in food away from home. On an annual basis, food rose 2.9% while energy was down 5.4%. Food prices are no longer providing the same lift to headline inflation that they were last year.

If food and gas are set aside, the so-called core consumer prices were sticky in November and rose a somewhat sharper 0.3% in November, an acceleration from October’s 0.2% gain due to higher shelter prices, the biggest expense for most families. The annual core rate, which has been has been stuck near 4% for the past several months, was unchanged at 4%. That's still twice as high as the Fed's 2% goal. The shelter index increased 0.4% MoM in November, after rising 0.3% the previous month. The index for rent rose 0.5% MoM, as did the index for owners’ equivalent rent which accelerated to 0.5% MoM from 0.4% in October. The shelter index increased 6.5% YoY, accounting for nearly 70% of the total increase in the core CPI. Non-housing services - the CPI measure of ‘supercore’ - also accelerated in November, rising 0.5% MoM from 0.2% in October.

Core goods prices surprised to the downside, falling by 0.3% MoM – a sharper decline than October’s 0.1% MoM pullback. Unlike months prior, where the declines have largely been concentrated in used vehicle prices, the pullback in November was spread across several categories including recreation commodities (-2.6% MoM), apparel (-1.3% MoM), household furnishings (-0.7% MoM), and new vehicle prices (-0.1% MoM).

Core services inflation firmed a bit in November, increasing 0.5% MoM after a 0.3% gain in October. Shelter inflation continues to moderate slowly rather than sharply, with primary shelter (rent of primary residences and owners’ equivalent rent) price growth edging up in November (0.5%) but continuing to move down on a yearover-year basis (6.7% after 6.9% in October). Among other services, medical care costs came in stronger, led by a rebound in physician services, while travel services (largely lodging away from home and airfares) declined less sharply.

Source: BIMB Securities Research - 13 Dec 2023