Keeping you up to date on the latest data releases.
The headline CPI was virtually flat (edging down just 0.2 percent at an annualized rate) in November. Excluding food and energy components, the price index rose 2.1 percent in November, compared to a 1.6 percent increase in October. Over the past year, the core CPI has risen 2.2 percent, though it has decelerated lately, as its near-term (3-month) growth rate stands at just 1.5 percent through November. Interestingly, measures of underlying inflation produced by the Federal Reserve Bank of Cleveland—the median CPI and 16 percent trimmed-mean CPI—came in roughly 1 percentage point lower than the core CPI in November. The median rose 1.1 percent, while the trim was up 1.0 percent. The discrepancy between the core and trimmed-mean measures appears to stem from apparel prices (particularly men’s and boy’s apparel, which jumped up 15 percent in November) putting upward pressure on the core CPI. Traditionally, apparel prices have been a relatively noisy influence on the price change indicators and recently the volatility in this series has grown markedly, so there is little reason to think upward pressure from this component is providing any meaningful signal of future inflation. For example, the variance in men’s and boy’s apparel has more than doubled in the wake of the recession, compared its average over the previous five years. If the idea of a “core” inflation measure is to amplify the signal-to-noise ratio than inclusion of this component isn’t helping.
Aside for the jump in apparel prices, there were a couple of other notable core component price increases to mention. Rent of primary residence and owners’ equivalent rent (OER) continued on their recent upward trek, rising 2.6 percent and 1.8 percent, respectively in November. Over the past 3 months, rent is up 3.4 percent and OER has increased 1.9 percent, both exceeding their respective 12-month growth rates of 2.4 percent and 1.7 percent. Also, medical care services prices followed up a 6.6 percent spike up in October by jumping up 6.0 percent in November, pushing its 3-month growth rate to its highest level (5.0 percent) since the onset of the recession. Despite a few notable increases, the price change distribution continued to point toward a weaker trajectory than the second and (most of) the third quarter. Over the last 3 months, nearly 40 percent of the overall index posted price gains of less than 1 percent or decreased outright, compared to just 25 percent over the previous three month span. Also, just 30 percent of the index rose at rates greater than 3 percent, compared to nearly half of the index from June to August.