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Consumers saw inflation pick up slightly in November as price increases in categories such as groceries, gasoline and new cars outweighed the same month’s slowdown in other categories such as shelter.
The Consumer Price Index, a key inflation measure, rose 2.7% last month compared to November 2023, the Bureau of Labor Statistics reported Wednesday. The annual rate rose from 2.6% in October.
Mark Zandi, chief economist at Moody’s, said he doesn’t think inflation will accelerate. “But I think that’s too persistent.”
“There’s no definitive answer to say, ‘This is the problem,'” Zandi said. “It’s kind of widespread, and it’s a little bit expensive everywhere.”
That said, economists say there is reason to be optimistic.
That means consumers can be “reassured” that economic trends supporting inflation, such as slowing wage growth in the labor market, remain strong, Zandi said.
Joe Seidle, senior market economist at JPMorgan Private Bank, said that although inflation appears to be “resurrecting,” “overall we still think we’re on the path to eliminating inflation.” “
“Recovery” in food prices
Inflation has fallen significantly from its pandemic-era peak of 9.1% in June 2022.
The US Federal Reserve (Fed) is aiming for a long-term inflation target of around 2%. The central bank uses an inflation measure similar to but different from the CPI, known as the Personal Consumption Expenditure Price Index (PCE).
“Most of this progress is now behind us, and inflation remains stubbornly close to current levels for some time,” Rick Rieder, head of BlackRock’s global allocation investment team, said in a note Wednesday. There is a possibility.”
Although price pressures have largely eased across the U.S. economy, there have been some headwinds in recent months.
For example, food inflation rose significantly from 0.1% monthly in October to 0.5% in November. Economists say a consistent monthly CPI of about 0.2% would generally be in line with the target inflation rate.
Egg prices have risen about 8% this month alone and 38% over the past year, according to CPI data.
“We’ve seen a recovery in food prices,” Zandi said. “Part of the reason is bird flu. Egg prices continue to be very high.”
Zandi said food prices are generally volatile, so a month of rising food inflation statistics shouldn’t cause alarm. But he said groceries will be an important category to focus on because they are “probably the most important” to the majority of households compared to pricing.
Cars and homes are also problem areas
In addition, categories such as transportation, health care and shelter are problem areas, Seidl said.
Vehicle prices and airfare are major components of the transportation category. However, Seidl said the recent inflation problems were likely to be short-lived.
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New car prices rose 0.6% from October to November, according to CPI data. Auto insurance prices rose just 0.1% over the same period, but rose 13% for the year.
In 2021, car prices soared due to a shortage of semiconductors, which are essential for car manufacturing. The result was severe vehicle shortages and high inflation. Prices then fell as dealers restocked their inventory. Now, some price volatility is natural as the market returns to equilibrium, Seidl said.
Car prices are reflected in car insurance. As prices rise, it also becomes much more expensive for insurance companies to replace your vehicle after a car accident. Also, for insurers to increase consumer insurance premiums, they typically require regulatory approval, which takes time.
Mr Seidl said airline prices, like car prices, were “finding a bottom”. Actual fares are about the same as before the coronavirus pandemic, according to CPI data.
“From 2019 to today, there has been no airfare inflation at all,” Seidl said. “We’ve seen a lot of volatility.”
He said labor costs are the main driver of medical inflation.
Although wage growth has generally slowed in most parts of the economy and companies are generally less likely to raise prices to compensate for labor, labor remains in short supply in the health sector. , price strength is “quite resilient,” Seidl said.
Prices for medical services rose 0.4% from October to November, and rose 4% for the year.
Housing, the largest component of the CPI, also continues to support overall inflation. According to the Bureau of Labor Statistics, shelters accounted for 40% of the monthly CPI increase.
However, it has decreased noticeably. The shelter index rose 4.7% from last year, the smallest 12-month increase since February 2022, according to the Bureau of Labor Statistics.
Rent inflation and owner-equivalent rents (estimates of the rent that homeowners can demand for their properties) recorded their smallest one-month increases since July 2021 and April 2021, respectively. It became.
