What To Look For In The November 2023 CPI Inflation Release

Stocks are nudging higher ahead of the release of the consumer inflation report, adding to gains from Monday and supported by a dip lower in Treasury yields. Futures on the S&P 500, which allow investors to bet on the market before trading officially opens, rose 0.2 percent immediately ahead of the data release. Perhaps of even greater note for inflation was the drop in diesel prices. Diesel is more important for structural inflation than gas, as it powers heavy machinery, agricultural equipment and trucks.

  1. Consumer prices were unchanged in October compared with a month earlier — that is, they didn’t rise at all on a seasonally adjusted basis.
  2. Combined with the flat (0.0 percent) month-to-month figure in October, consumer prices have now risen just 0.1 percent over the past two months.
  3. Analysts also warn that many consumers may be less willing or able to splurge on travel than they were in the last couple of years, when they had pandemic savings to draw from.
  4. Inflation rose more than expected in January as stubbornly high shelter prices weighed on consumers, the Labor Department reported Tuesday.
  5. But the government’s measure of rents has been slower to moderate, in part because it includes all rental homes, not just those that turn over to new tenants.
  6. For policymakers at the Federal Reserve, who have been raising interest rates to slow the economy and try to tame recent rapid inflation, the report was a fresh sign that continued aggressive action may be needed to wrestle them lower.

Nowcasts use currently observable market prices, such as for energy commodities, to estimate upcoming inflation figures. Michael Swanson, the chief agricultural economist at Wells Fargo, said he anticipated grocery price growth to cool substantially over the next few months. He said he also expected menu prices at restaurants to ease, but those prices have not cooled https://g-markets.net/ as much because business owners have struggled to deal with higher labor costs. Wage growth has moderated in recent months, but it is still elevated compared to prepandemic levels. Tuesday’s report offered renewed evidence of progress on those critical fronts. A closely watched measure of housing costs moderated after unexpectedly ticking up in September.

Hot Inflation Shows Fed Rate Cuts as Far Away as Ever

When prices first began rising rapidly last year, the problem was concentrated in the goods sector, reflecting supply chain disruptions that made it hard for automakers and other manufacturers to meet strong demand. More recently, goods inflation has begun to ebb, but that decline is being offset, at least in part, by faster inflation in services, including housing. There have been signs of hope for administration officials, both among consumers and companies. The National Federation of Independent Business reported on Tuesday that its Small Business Optimism Index rose in August as inflation anxiety eased, continuing a rebound from its depths earlier this year.

October CPI Report Forecast to Show Overall Inflation Moderating

However, under the hood, forecasts call for a more mixed picture from the CPI. When volatile food and energy costs are excluded from the picture, the underlying rate of inflation is expected to remain more than double what the Fed is targeting. With that backdrop, the regulator is seen as on track to raise interest rates by another quarter-point when officials meet later this month to set monetary policy.

Definition and an Example of CPI Calculation

Lastly, shelter costs are a major component of the CPI and the Fed expects price growth to moderate or ultimately even decline here. That’s as mortgage costs have increased sharply in recent years, limiting housing affordability. For October, shelter costs rose 0.3% month-on-month, signaling deceleration in 2023.

As a result, looking at core inflation excluding shelter costs, inflation “has come down quite significantly as well. One of the key factors keeping inflation elevated has been housing costs, thanks to owners’ equivalent rent and tenants’ rent. Economists note that the CPI’s reading on rental costs has been moving lower at a significantly slower pace than what real-world costs appear to suggest should be the case. A long-time financial journalist, Dan is a veteran of SmartMoney, MarketWatch, CBS MoneyWatch, InvestorPlace and DailyFinance. As a senior writer at AOL’s DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities. Per the BLS, prices for the goods and services used to calculate the CPI are collected in 75 urban areas throughout the country and from about 23,000 retail and service establishments.

A measure of inflation in other services — which encompass everything from manicures to health care — also came down notably, to the slowest pace since late 2021 based on Bloomberg calculations. Inflation eased in October and price increases showed encouraging signs of slowing under the surface, according to fresh data released on Tuesday. The report provides the Federal Reserve with evidence that its battle against rapid inflation is working. “Breaking the 3% level is proving tougher than expected,” added Robert Frick, corporate economist with Navy Federal Credit Union. Much of the standstill can be attributed to stubbornly strong shelter prices, though the food-price increases were “particularly painful,” he said. That is particularly true for lower-income households already hit hard by the effects of inflation and higher interest rates.

Data from private companies like Zillow and Apartment List have shown rents rising more slowly — or even falling outright in some markets — for more than a year. An experimental measure from the Labor Department has told a similar story. Mr. Biden also continued his recent calls for corporate America to reduce prices.

“Now that our actions have helped rebuild supply chains and brought down input costs, I’m calling on large corporations to pass along the savings to consumers,” he said. The Fed is watching incoming economic data closely and may raise interest rates one more time in 2023 if it doesn’t see inflation continue to cool. One of the most significant numbers in Thursday’s CPI report will be shelter costs.

Within the numbers the Fed will be, once again, watching services inflation. As the labor market remains generally robust, the concern for the Fed is that services prices may continue to rise materially. The inflation data will certainly influence what the central bank decides to do at the next double top forex Fed meeting. The FOMC left interest rates unchanged when it last met in January, and isn’t expected to start cutting until its May meeting, at the earliest. “The annual core rate of inflation has increased the past three months and is running at the hottest pace in 40 years,” McBride says.

That’s only slightly less than September’s 8.2%, and well above the Federal Reserve’s target rate of 2%. Specifically, inflation is predicted to be 7.9% year-over-year as of October, according to a median forecast of 52 economists surveyed by Bloomberg News. Banks including Citigroup, Deutsche Bank, JP Morgan Chase and Wells Fargo have similar projections. Forecasts expect it to barely dip below the 8% year-over-year rate it’s been floating above since March.

But polls continue to show inflation is hurting Mr. Biden and his party, as Democrats seek to retain control of the House and Senate. It looms as the top issue for voters in national opinion polls, and Americans say they trust Republicans more to handle inflation and the economy overall than Democrats. Even looking at overall inflation, the report’s details offered plenty to worry about. But that improvement has been more gradual than either renters or policymakers had hoped.

But Tuesday’s report helped cement a view in financial markets that the Fed’s efforts are working. But Tuesday’s report may give officials more confidence that their policy changes are working, and that they do not need to take further action to wrangle price increases. Used vehicle prices declined 3.4%, apparel costs fell 0.7% and medical commodities declined 0.6%. “Inflation is generally moving in the right direction,” said Lisa Sturtevant, chief economist at Bright MLS. Shelter prices, which comprise about one-third of the CPI weighting, accounted for much of the rise.

That translates to a 3.7% annual rate for headline CPI and 4.2% for core CPI. If this nowcast holds, it would continue the recent trend of headline inflation accelerating as core inflation cools. The “core” CPI solves the problem of volatile food and energy prices by excluding them. The Fed has considered core CPI in the past when deciding whether to raise the fed funds rate (the interest rate for overnight loans between banks). The core CPI is useful because food, oil, and gas prices are volatile, and the Fed’s tools are slow-acting. January’s core CPI, which excludes volatile food and energy prices, is expected to increase 3.8% annually and 0.3% on a monthly basis.

In August, prices for groceries rose 0.7 percent, while the prices for restaurant meals accelerated more quickly, rising 0.9 percent from the month before. Food prices in August were up 11.4 percent from the same month a year ago. Food inflation in the United States has risen to its highest level in more than 40 years this year, driven by trends both within the United States and abroad. Farmers and grocers have had to pay higher prices for gasoline, worker wages and packaging, which they have in turn passed on to their consumers. The S&P 500 slumped 4.3 percent on Tuesday, its biggest drop since the depths of the coronavirus pandemic in June 2020. Stocks plummeted, U.S. government bond yields rocketed higher, and the dollar bounced, after fresh inflation data undermined investors’ bets over the slowing pace of inflation in August.






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