November Inflation Eases to 11-Month Low of 7.1%

Declines in food, fuel and used cars prices pushed annual inflation to an 11-month low.

According to the latest Consumer Price Index (CPI) released Tuesday (Dec. 13) by the Bureau of Labor Statistics, the pace of annual price increases slowed to 7.1% in November, marking the fifth consecutive month of easing prices, after hitting a 40-year high of 9.1% in June.

When volatile food and energy prices are backed out, the so-called core inflation rate slipped to 6% annually in November, its lowest point since July’s 5.9% reading.

The month-on-month data also reflected a similar downtrend in prices, with the headline number rising just 0.1% from October, the slowest pace in almost a year, and the monthly core inflation rising just 0.2%.

“Honestly, wherever you look in this inflation report, it’s hard to find bad news,” Justin Wolfers, an economics professor at the University of Michigan, tweeted after the data release. “The same was true last month, and that came with the warning that no one report should change your mind. Now, two reports shouldn’t either, but it sure should give you cause for optimism.”

Honestly, wherever you look in this inflation report, it’s hard to find bad news.

The same was true last month, and that came with the warning that no one report should change your mind. Now, two reports shouldn’t either, but it sure should give you cause for optimism.

— Justin Wolfers (@JustinWolfers) December 13, 2022

Looking inside the report, the biggest monthly declines were seen in a 3.5% drop in piped natural gas service, a 2.9% monthly slip in used car prices and a 2% slump in gasoline prices from October levels.

Dampening those declines, however, was a 1.7% monthly increase in fuel oil, followed by a 0.6% increase in rents or shelter costs and a 0.5% rise in the cost of both food eaten at home and away from home.

While the downtrend is welcome relief, the impact on household budgets and holiday shopping demand is likely to be muted as the annualized 7.1% inflation rate is still more than triple the Federal Reserve’s 2% target level. That headline figure also masks several areas of double-digit inflation where prices have come down but are still substantially higher than where they were last year.

By that measure, the 65% annual increase in fuel oil is currently the biggest hit on household budgets right now, followed by a 14% increase in transportation services and the increased cost of groceries and restaurants, which are up more than 10% and 12%, respectively, from 2021 levels.

The closely-watched inflation data comes just one day ahead of the Fed’s latest interest rate decision, and two days before the latest reading on retail sales, which is set to be released Thursday morning (Dec. 15).

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