| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - M/M | 0.0% | 0.0% to 0.2% | 0.1% | 0.0% |
| CPI - Y/Y | 3.1% | 3.0% to 3.2% | 3.1% | 3.2% |
| Ex-Food & Energy- M/M | 0.3% | 0.2% to 0.3% | 0.3% | 0.2% |
| Ex-Food & Energy- Y/Y | 4.0% | 3.9% to 4.0% | 4.0% | 4.0% |
Highlights
Prices edged up 0.1 percent in November from October, slightly above Econoday's consensus, while the 12-month inflation rate edged down to 3.1 percent from 3.2 percent, as expected. Excluding food and energy, the CPI was up 0.3 percent on the month after rising 0.2 percent in October, and increased 4.0 percent year-over-year, the same as the previous month, as expected.
While the slowdown in the headline inflation rate to 3.1 percent was a welcome development, the stabilization of the core index at 4.0 percent twice as much as the Federal Reserve's target could incentivize the central bank to wait longer than market are expecting.
Food prices increased 0.2 percent on the month and 2.9 percent year-over-year, and energy fell 2.3 percent and 5.4 percent, respectively.
Services prices increased 0.5 percent on the month and 5.2 percent from a year earlier.
Shelter, up 0.4 percent after 0.3 percent in October, was the largest contributor to November's core CPI monthly advance. The indexes for rent and owners' equivalent rent both rose 0.5 percent on the month. Shelter prices increased 6.5 percent year-over-year, accounting for 70 percent of the core CPI appreciation. Used cars and trucks increased 1.6 percent after five months of declines, medical care was up 0.6 percent, and car insurance rose 1.0 percent. On the downside, apparel fell 1.3 percent and household furnishings and operations declined 0.4 percent, and communication 0.6 percent. Monthly prices also decreased for recreation, airline fares, and new vehicles.
While the slowdown in the headline inflation rate to 3.1 percent was a welcome development, the stabilization of the core index at 4.0 percent twice as much as the Federal Reserve's target could incentivize the central bank to wait longer than market are expecting.
Food prices increased 0.2 percent on the month and 2.9 percent year-over-year, and energy fell 2.3 percent and 5.4 percent, respectively.
Services prices increased 0.5 percent on the month and 5.2 percent from a year earlier.
Shelter, up 0.4 percent after 0.3 percent in October, was the largest contributor to November's core CPI monthly advance. The indexes for rent and owners' equivalent rent both rose 0.5 percent on the month. Shelter prices increased 6.5 percent year-over-year, accounting for 70 percent of the core CPI appreciation. Used cars and trucks increased 1.6 percent after five months of declines, medical care was up 0.6 percent, and car insurance rose 1.0 percent. On the downside, apparel fell 1.3 percent and household furnishings and operations declined 0.4 percent, and communication 0.6 percent. Monthly prices also decreased for recreation, airline fares, and new vehicles.
Market Consensus Before Announcement
Core prices in November are expected to accelerate slightly to a monthly increase of 0.3 percent versus a 0.2 percent rise in October. Overall prices on the month are expected to come in unchanged as they did in October. Annual rates, at 3.2 percent overall and 4.0 percent for the core in October, are expected at 3.1 and 4.0 percent respectively.
Definition
The CPI is a measure of the change in the average price level of a fixed basket of goods and services purchased by consumers. Monthly changes in the CPI represent the rate of inflation for the consumer. Annual inflation is also closely watched.
The consumer price index is available nationally by expenditure category and by commodity and service group for all urban consumers (CPI-U) and wage earners (CPI-W). All urban consumers are a more inclusive group. The CPI-U is the more widely quoted of the two, although cost-of-living contracts for unions and Social Security benefits are usually tied to the CPI-W, because it has a longer history. Monthly variations between the two are slight.
The CPI is also available by size of city, by region of the country, for cross-classifications of regions and population-size classes, and for many metropolitan areas. The regional and city CPIs are often used in local contracts.
The Bureau of Labor Statistics also produces a chain-weighted index called the Chained CPI. This measures a variable basket of goods and services whereas the regular CPI-U and CPI-W measure a fixed basket of goods and services. The Chained CPI is similar to the personal consumption expenditure price index that is closely monitored by the Federal Reserve Board.
The consumer price index is available nationally by expenditure category and by commodity and service group for all urban consumers (CPI-U) and wage earners (CPI-W). All urban consumers are a more inclusive group. The CPI-U is the more widely quoted of the two, although cost-of-living contracts for unions and Social Security benefits are usually tied to the CPI-W, because it has a longer history. Monthly variations between the two are slight.
The CPI is also available by size of city, by region of the country, for cross-classifications of regions and population-size classes, and for many metropolitan areas. The regional and city CPIs are often used in local contracts.
The Bureau of Labor Statistics also produces a chain-weighted index called the Chained CPI. This measures a variable basket of goods and services whereas the regular CPI-U and CPI-W measure a fixed basket of goods and services. The Chained CPI is similar to the personal consumption expenditure price index that is closely monitored by the Federal Reserve Board.
Description
The consumer price index is the most widely followed monthly indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets- and your investments.
If someone borrows $100 dollars from you today and promises to repay it in one year with interest, how much interest should you charge? The answer depends largely on inflation as you know the $100 will not be able to buy the same amount of goods and services a year from now. The CPI tells us that prices rose 4.2 percent in the U.S. over 2007. To recoup your purchasing power, you would have to charge 4.2 percent interest. You might want to add one or two percentage points to cover default and other risks, but inflation remains the key factor behind the interest rate you charge.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets- and your investments.
If someone borrows $100 dollars from you today and promises to repay it in one year with interest, how much interest should you charge? The answer depends largely on inflation as you know the $100 will not be able to buy the same amount of goods and services a year from now. The CPI tells us that prices rose 4.2 percent in the U.S. over 2007. To recoup your purchasing power, you would have to charge 4.2 percent interest. You might want to add one or two percentage points to cover default and other risks, but inflation remains the key factor behind the interest rate you charge.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
