Inflation Watch: Headline Inflation Moderates, Core Rises

The Bureau of Labor Statistics released the CPI data for November this morning. Year-over-year Headline CPI came in at 2.96%, which the BLS rounds to 3.0%, down from 3.39% last month. Year-over year-Core CPI came in at 2.23%, which the BLS rounds to 2.2%, up from 2.15% last month.

Here are excerpts from the BLS summary:

    The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in December on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.0 percent before seasonal adjustment.

    Similar to last month, the energy index declined in December and offset increases in other indexes. The gasoline index declined for the third month in a row and the household energy index declined as well. The food index rose in December, with the index for food at home turning up after declining last month.

    The index for all items less food and energy increased 0.1 percent in December after rising 0.2 percent in November. The indexes for shelter, recreation, medical care, and tobacco all posted increases, while the indexes for used cars and trucks, new vehicles, and apparel all declined.  More...

The Briefing.com consensus forecast was for 0.1% for both Headline and Core month-over-month. The actual was 0.0% Headline and 0.1% Core.

The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since 1957. The second chart gives a close-up of the two since 2000.

On this chart, I've highlighted the 1.75% - 2% range, which is generally understood to be the Fed's target for core inflation. Here we see more easily see the widening spread between headline and core CPI since late 2010, although the headline rate of change has moderated over the past few months and declined in October.

Federal Reserve policy, which focuses on core inflation, and especially the core Personal Consumption Expenditures (PCE), will see that the latest core CPI is continuing to move above the top of the target range.