Consumer prices actually rose less in November 2022 with an increase of 7.1% one year ago

In November, prices rose less than expected, the latest sign that the runaway inflation that has been gripping the economy is beginning to loosen up.
The Labor Department reported on Tuesday that the consumer price index, which measures a wide basket of goods and services, rose just 0.1% from the previous month and increased 7.1% from a year ago. Dow Jones surveyed economists expecting a 0.3% monthly increase and 7.3% 12-month rate.
The increase from a year ago was tied for the lowest since November 2021, while well above the Federal Reserve’s 2% target for a healthy inflation level.
So-called core CPI, excluding volatile food and energy prices, rose 0.2% on the month and 6% on an annual basis, compared with respective estimates of 0.3% and 6.1%.
Stocks roared higher following the report on inflation, with futures tied to the Dow Jones Industrial Average up more than 800 points initially before easing a bit. According to Robert Frick, corporate economist with Navy Federal Credit Union, cooling inflation will boost the markets and take pressure off the Fed for raising rates; most importantly, this spells real relief starting for Americans whose finances have been punished by higher prices.
“This is especially true for lower-income Americans who are disproportionately hurt by inflation, falling energy prices helped keep inflation at bay.” The energy index declined 1.6% for the month, due in part to a 2% decrease in the price of gasoline. However, food prices rose 0.5% and were up 10.6% from a year ago. The energy index was up 13.1% from November 2021, even with its monthly decline. Rising shelter costs, which make up about one-third of CPI weighting, continued to escalate, rising 0.6% on the month and now up 7.1% on an annual basis.
After months of seeing wage increases fall well short of inflation, the easing of inflation pressures helped give workers a lift. Real average hourly earnings rose 0.5% for the month, which is still down 1.9% from a year ago.
The rate-setting Federal Open Market Committee begins its two-day meeting the same day as the CPI report. The markets are expecting the FOMC to announce a 0.5 percentage point rate increase on Wednesday, regardless of Tuesday’s CPI reading.
Paul Ashworth, chief North America economist for Capital Economics, wrote in a post-CPI note titled, “Stick a fork in it, inflation is done,” that 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.
Factors such as the continuing pandemic and increased government spending caused inflation to spike in the spring of 2021, taking price increases to their highest levels since the stagflation days of the early 1980s. The main aggravating circumstances were a supply and demand imbalance brought on by the pandemic, Russia’s invasion of Ukraine and the impact on energy prices, and trillions of dollars in fiscal and monetary stimulus that sent an abundance of money chasing too few goods that were caught up in supply chain problems.
Vehicle prices, which had been a major contributor to the initial inflation burst, fell 2.9% for the month and are now down 3.3% from a year ago. The used cars and truck index was up more than 40% on an annual basis in February, the result of higher demand as a microchip shortage caused a backlog in new car production.
Medical care services costs declined 0.7% on a month basis and were up 4.4% annually.
The headline CPI peaked at around 9% in June 2022 and has been on a slow but steady decline since then.
Federal Reserve officials began raising interest rates in March after dismissing the inflation surge as “transitory” for months. The central bank has increased its short-term borrowing rate six times in all, pushing the benchmark up to a targeted range of 3.75%-4%.
Looking at services inflation excluding shelter costs will be an important component in determining future monetary policy moves, according to Fed Chairman Jerome Powell’s recent statement. The gauge was only slightly different in November, but it is up almost 7.3% from this time last year.