November Inflation Rose Less Than Expected at 7.1%

The consumer price index eased last month, slowly falling from its four-decade high in June.

December 14, 2022

ALEXANDRIA, Va.—Inflation rose at its slowest pace in 12 months, reports the Wall Street Journal and CNBC. The consumer price index (CPI) went up 7.1% in November versus a year ago, down from 7.7% in October. Inflation peaked in June at 9.1% and has been slowly trending downward, but prices are still above the  2.1% average rate in the three years before the pandemic.

Core CPI was up 6% last month year over year. This measurement does not include energy or food prices. October saw a 6.3% increase, and September was up 6.6%—the biggest increase since August 1982.

“Cooling inflation will boost the markets and take pressure off the Fed for raising rates, but most importantly this spells real relief starting for Americans whose finances have been punished by higher prices,” Robert Frick, corporate economist with Navy Federal Credit Union, told CNBC. “This is especially true for lower-income Americans who are disproportionately hurt by inflation.”

Gasoline prices, along with costs for medical care and used cars fell in November, while new vehicle costs were flat. Food costs were up 0.5% and remain high year over year at 10.6% compared to November 2021. The energy index was down 1.6% for the month, due in part to gas prices declining 2%. However, the energy index overall  is up 13.1% over November.

Federal Chairman Jerome Powell recently said that price trends for services, not including housing, reflect inflationary pressures in the broader economy and were important when gauging inflation’s future path, reports the Journal.

“Because wages make up the largest cost in delivering these services, the labor market holds the key to understanding inflation in this category,” he said in a recent speech.

Restaurant meal prices moderated, rising 0.5% month over month, compared to the 0.9% average pace from June to October. Recreational services were up 1% month over month, the highest increase since May 2020. Sporting event tickets were up 3.5%, the most since records began in 1978, while costs for personal case services were up 1.4% over October, the biggest gain since July 2021.

Housing costs increased again by 0.6% month over month and are up 7.1% year over year. Housing makes up about one-third of the CPI, and the sector adjusts slowly because leases are usually determined on a yearly basis. That lag means housing costs could keep core CPI high for months.

“For the next six to 12 months, even without moderation in wage growth, core inflation can come down quite considerably with just the disinflation we’re going to be getting from goods and shelter prices,” Paul Ashworth, chief U.S. economist at Capital Economics, told the Journal.

The CPI numbers were released as the Federal Open Market Committee meets to decide on an increase of the federal interest rate. According to CNBC, markets are widely expecting the Federal Reserve to announce at 0.5 percentage point increase, which would be the seventh increase in a row this year.

“The Fed could dismiss the better-than-expected October as just one month’s data, but the further slowdown in November makes this new disinflationary trend harder to dismiss,” Paul Ashworth, chief North America economist for Capital Economics, wrote in a post-CPI note titled, “Stick a fork in it, inflation is done.”