The Economy

Core Consumer Prices Rise 0.1% in November

The continuing weakness in core CPI will "make the Fed deliberations about the pace of monetary policy tightening next year more complicated."
Matthew HellerDecember 14, 2017

Core U.S. consumer prices increased only slightly in November, reflecting a sharp, weather-related decline in apparel prices.

The weakness of underlying inflation has been a concern for some Federal Reserve officials, with the Fed’s preferred inflation measure, the core personal consumption expenditures price index, consistently missing its 2% target for almost 5-1/2 years.

Wednesday’s inflation report from the Labor Department showed the core consumer price index — excluding the volatile food and energy components — increasing 0.1% in November after a 0.2% gain in October.

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As a result, the annual increase in the core CPI slowed to 1.7% in November from 1.8% in October. Economists had expected a 0.2% gain last month.

“Inflation has moderated for much of this year, leading to concern among some Fed officials that the factors holding back price pressures could prove more persistent,” Reuters said.

The Fed on Wednesday hiked interest rates for the third time this year but according to Kathy Bostjancic, head of U.S. macro investor services at Oxford Economics, “The lack of a sustained pickup in core CPI does make the Fed deliberations about the pace of monetary policy tightening next year more complicated.”

The overall CPI increased 0.4% in November after edging up 0.1% in October. The year-on-year increase rose to 2.2% from 2.0% in October.

Core prices were hit by a 1.3% drop in apparel prices, the largest fall since September 1998, after dipping 0.1% in October. Economists cited an unseasonably warm November as well as competition from online retailers such as Amazon.

“It was one of the warmest Novembers on record, which means that people would have bought proportionally less full-price winter clothing and more discounted summer/fall clothing,” said Paul Ashworth, chief economist at Capital Economics in Toronto. “If we’re right, clothing prices will snap back in December.”

The cost of healthcare services slipped 0.1%, the first drop since May, with prices for doctor visits falling 0.8%. In the 12 months through November, the cost of doctor visits tumbled 1.8%, the biggest decline since records started in 1947.