Consumer Prices Edge Up Slightly in November
U.S. consumer prices edged up slightly more than expected in November, increasing 0.2% overall after a flat October, as the cost of items including travel and apparel rose.
The increase for airfare was 3.5%, car and truck rentals, 4.4%, other intercity transportation, 3.2%, and hotels and motels, 4.5%, the Bureau of Labor Statistics said in Thursday’s report on the Consumer Price Index. Apparel prices rose 0.9%, and there were slight increases in household furnishings and recreation too. The price of used cars and trucks notably fell for a second straight month, declining 1.3%, after low supply and a wariness of public transportation drove monthly increases as high as 6.7% over the summer.
Food prices slid 0.1% as the cost of groceries fell 0.3%, outweighing a 0.1% increase in the cost of dining out. Energy prices rose 0.4%, as increases in natural gas and electricity prices more than offset a decline in gas prices. Prices excluding food and energy, which tend to be more volatile, also rose 0.2%, and both this core inflation rate and the overall increase beat the average 0.1% increase forecast by economists polled by Moody’s Analytics.
The very modest inflation reflects weak demand in the COVID-19 pandemic. Year-over-year, core prices were up 1.6%—less than what’s needed for the labor market to fully recover, according to the Federal Reserve. Earlier this year, the Fed said the economy needs something “moderately above” the traditional 2% inflation sweet spot as it navigates the pandemic.
“With workers fearful of losing their jobs during this second wave, inflation remains tame,” Sal Guatieri, senior economist at BMO Capital Markets, wrote in a commentary. “The core rate remains stuck within a narrow band and well below February’s 2.4% pace. Due to the weakening labor market, the Fed's goal of lifting inflation moderately above the 2% target for some time will remain well out of reach for a while.”
Still, economists at First Trust Advisors predicted that further fiscal stimulus from the government could eventually lead to “too many dollars chasing too few goods.”
“We expect inflation will continue to rise in the months ahead toward the 2.0% annual pace of inflation that was in effect before the coronavirus wreaked havoc on global economies,” the economists wrote.