CPI: Energy Prices Decline, Core Inflation Modest

December 15, 2015
The CPI was UNCHANGED in November, in line with market expectations. Food prices declined by 0.1% while energy prices fell by 1.3%. Prices for gasoline dropped by 2.4% while prices for fuel oil declined by 0.2%, prices for electricity climbed by 0.3%, but prices for natural gas fell by 1.9%. Energy prices are now 14.8% BELOW their year ago level. Overall consumer prices are now 0.4% ABOVE their year ago level; in November 2014, consumer prices were 1.3% ABOVE their year ago level. Year-over-year consumer inflation peaked in September 2011 at 3.9% and then slowed and bottomed at 0.9% in October 2013 and then was rising modestly until May 2014, but since then it has been slowing. The Core CPI ROSE by 0.2%, in line with market expectations. Prices for commodities excluding food and energy commodities fell by 0.2%. Gains in tobacco (+0.5%), medical care (+0.3%), new vehicles (+0.1%) were partially offset by declines in apparel (-0.3%), used cars & trucks (-0.1%) and alcoholic beverages. Prices for services excluding energy services rose 0.3% with moderate increases in transportation (+0.6%), medical care services (+0.4%) and shelter (+0.2%). Core consumer prices are now 2.0% ABOVE their year ago level; in November 2014, consumer prices were 1.7% ABOVE their year ago level. Year-over-year core consumer inflation bottomed at 0.6% in October 2010, then rose through May 2012 to a peak of 2.3%. Bottom Line: Headline consumer inflation was unchanged in November in line with expectations. Consumer prices are now 0.4% above their year ago level. Meanwhile, core consumer prices rose modestly and are 2.0% above their year ago level. Owners' Equivalent Rent (a major component of CPI that is an estimate of the cost of shelter) rose by 0.2%, 3.1% year-over-year and has moved 40 bps over the past year. Overall core inflationary pressures at the consumer level still remain modest but are rising now compared to year-ago levels.
Article by contingentmacro