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CPI: In-Line Report, Deceleration In Trend Hinges on OER Now

December 12, 2018
Bottom Line: CPI was flat in November as gasoline prices fell over 4%. Core CPI was up 0.2%, 2.2% versus a year ago. The three-month average pace is nearly in-line with the 6-month average pace for core , suggesting the modest deceleration we saw over the last half of 2018 might be ending with core stable around 2%. That said, there are still hints a modestly decelerating trend in Owner's Equivalent Rent, a key driver of the price of shelter and about a third of core. The three-month average annualized pace for OER is 2.69%, modestly below the six-month pace of 2.85% annualized and well below the 12-month pace of 3.31%. Looking through downside volatility in apparel and upside volatility in used autos in the last few months, .overall inflationary pressures at the consumer level are stabilizing at the 2% level with the trend largely now dependent on OER, where there are still hints of deceleration.

The CPI was UNCHANGED in November, compared with market expectations for an increase of 0.3%.
  • Food prices increased by 0.22% while energy prices fell by 2.2%.
  • Prices for gasoline fell by 4.2% while prices for fuel oil declined by 2.5%, prices for electricity climbed by 0.3%, and prices for natural gas rose by 0.7%. Energy prices are now 3.2% ABOVE their year ago level.
Overall consumer prices are now 2.2% ABOVE their year ago level; in November 2017, consumer prices were 2.2% ABOVE their year ago level.

The Core CPI ROSE by 0.2%, compared with market expectations for an increase of 0.2%.
  • Prices for commodities excluding food and energy commodities rose by 0.2%.
  • Gains in used cars & trucks (+2.4%), tobacco (+0.4%), were offset by declines in apparel (-0.9%).
  • Prices for services excluding energy services rose 0.2% with moderate increase in medical care services (+0.4%), shelter (+0.3%), and owner's equivalent rent (+0.3%).
Core consumer prices are now 2.2% ABOVE their year ago level; in November 2017, consumer prices were 1.7% ABOVE their year ago level.