US annual CPI up nearly 7% in November; underlying inflation pressures “intensifying”

Summary: US CPI increases by 0.8% in November, more than 0.7% expected; “core” rate up 0.5%, in line with expectations; core CPI “not yet peaked”; underlying inflation pressures “intensifying”; fuel prices, rents, commodities main drivers of headline rise.

The annual rate of US inflation as measured by changes in the consumer price index (CPI) halved from nearly 3% in the period from July 2018 to February 2019. It then fluctuated in a range from 1.5% to 2.0% through 2019 before rising above 2.0% in the final months of that year. Substantially lower rates were reported from March 2020 to May 2020 and they remained below 2% until March this year. Rates has risen significantly since then.

The latest CPI figures released by the Bureau of Labor Statistics indicated seasonally-adjusted consumer prices increased by 0.8% on average in November. The result was higher than the 0.7% consensus expectation but slightly lower than October’s 0.9% rise. On a 12-month basis, the inflation rate accelerated from October’s seasonally adjusted reading of 6.2% to 6.9%.

“Headline” inflation is known to be volatile and so references are often made to “core” inflation for analytical purposes. Core inflation, a measure of inflation which strips out the more variable food and energy components of the index, increased by 0.5% on a seasonally-adjusted basis for the month. The result was in line with the expected figure but just below October’s 0.6% increase. The annual growth rate increased from 4.6% to 5.0%.

“The bottom line in that core CPI has not yet peaked [and is] almost guaranteed to rise above 6%,” said Ray Attrill, NAB’s Head of FX Strategy within its FICC division.


The report was released on the same day as the University of Michigan’s December reading of its Index of Consumer Sentiment and US Treasury bond yields generally declined on the day. By the close of business, the 2-year Treasury yields had shed 3bps to 0.66%, the 10-year yield had lost 2bps to 1.48% while the 30-year yield finished unchanged at 1.88%.

In terms of US Fed policy, expectations of any change in the federal funds range over the next 12 months softened slightly. December 2022 futures contracts implied an effective federal funds rate of 0.685%, 60bps above the spot rate but 2.5bps lower than at the end of the previous day.

“Whilst the data were in line with expectations, the core numbers show that underlying inflation pressures are intensifying,” said ANZ economist Hayden Dimes. He noted “core services inflation, 58% of the CPI, is running at 4.0% with an upward bias” while “shelter prices, 32.5% of the index, are running at 5.6% and goods prices excluding food and energy are running at 8.4%.”

The largest influence on headline results is often the change in fuel prices. “Energy commodities”, the segment which contains vehicle fuels, increased by 5.9%, adding 0.25 percentage points. Prices of “Services less energy services”, the segment which includes actual and implied rents, increased by 0.4% while “Commodities less food and energy”, the segment which includes clothes and vehicles, increased by 0.9%. These two categories added 0.23 percentage points and 0.19 percentage points respectively.


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