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Consumers saw inflation rise slightly in November as rising prices in categories such as groceries, gasoline and new cars outweighed falling prices in other categories such as homes.
this consumer price indexThe U.S. Bureau of Labor Statistics reported Wednesday that a key measure of inflation rose 2.7% last month from November 2023. The annual rate increased from 2.6% in October.
“I don’t see inflation accelerating,” said Mark Zandi, chief economist at Moody’s. “But I think it continues to be too strong.”
“This is not conclusive evidence that says, ‘This is the problem,'” Zandi said. “It’s broad-based but a little on the high side here and there.”
Still, economists say there is reason to be optimistic.
That said, consumers can take “comfort” in remaining optimistic about economic trends supporting inflation, such as slower wage growth in the labor market, Zandi said.
Joe Seydl, senior market economist at JP Morgan Private Bank, said that despite a “recovery” in inflation, “we still think we are generally on a deflationary path.”
Food prices ‘rebound’
Inflation has pull back This is a significant decrease from the peak of 9.1% in June 2022 during the pandemic.
The Fed’s long-term inflation target is around 2%. (The central bank uses a similar but different inflation measure to CPI, the personal consumption expenditures price index (PCE).)
“Now that most of that progress has passed, inflation is likely to remain stubbornly near current levels for some time,” Rick Rieder, head of BlackRock’s global allocation investment team, wrote in a note on Wednesday. .
While price pressures in the U.S. economy have generally eased, there have been some headwinds in recent months.
For example, grocery inflation rose significantly in November, rising from 0.1% in October to 0.5% in November. (For context, monthly CPI readings of around 0.2% are typically consistent with target inflation, economists say.)
Egg prices have risen about 8% in just one month and 38% over the past year, according to Consumer Price Index (CPI) data.
“We’re seeing a rebound in food prices,” Zandi said. “Part of it is avian flu: egg prices continue to be very strong.”
Zandi said food prices are generally volatile, so a rise in one-month grocery inflation numbers shouldn’t set off alarm bells. However, he said it will be an important category to watch because groceries are “probably the most important” to most households relative to pricing.
Cars and housing are other problem points
Additionally, categories such as transportation, health care and housing have also been troublesome, Seidel said.
Car prices and air tickets are important components of the transportation category. However, Seidel said the recent inflation may be short-lived.
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According to CPI data, new car prices rose 0.6% from October to November. Car insurance costs rose only 0.1% during the same period, but rose 13% for the year.
Car prices soared in 2021 due to a shortage of semiconductors necessary to build them. This has led to severe vehicle shortages and high inflation. Later, prices fell as dealers rebuilt inventories. Now, some price swings are natural as the market returns to equilibrium, Seidel said.
Car price is included in motor vehicle insurance: When prices rise, it also costs insurance companies much more to replace a vehicle after a crash. Insurers also typically need regulatory approval to raise consumer premiums, which takes time.
Seidel said that, like car prices, airline prices are “bottoming out.” The actual fare is approximately where are they Before the Covid-19 pandemic, according to CPI data.
“We haven’t really had any airfare increases from 2019 to now,” Seydl said. “We’ve just seen a lot of volatility.”
Labor costs are a major input into medical inflation, he said.
Seidel said that while wage growth has generally slowed across much of the economy – generally reducing the likelihood that companies will raise prices to compensate for labor – there is still a labor shortage in the health care industry, making price strength “fairly resilient.”
From October to November, the price of medical services increased by 0.4%, and the price increased by 4% for the whole year.
As the largest component of the CPI, real estate also continues to support overall inflation data. According to the Bureau of Labor Statistics, housing spending accounted for 40% of the monthly increase in CPI.
However, the index has declined significantly: The Bureau of Labor Statistics said the housing index increased 4.7% from last year, the smallest 12-month increase since February 2022.
Inflation rates for rents and landlord-equivalent rents – an estimate of the rental price homeowners can charge for their properties – saw their smallest monthly increases since July 2021 and April 2021 respectively.
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