Inflation Watch: Highest Core Inflation Since September 2008

The Bureau of Labor Statistics released the CPI data for November this morning. Year-over-year Headline CPI came in at 2.93%, which the BLS rounds to 2.9%, down from 2.96% last month (BLS rounded to 3.0%). Year-over year-Core CPI came in at 2.28%, which the BLS rounds to 2.3%, up from 2.23% last month. Headline inflation posted the highest annual rate since September 2008.

Here are excerpts from the BLS summary: The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in January on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.9 percent before seasonal adjustment.

The indexes for food, energy, and all items less food and energy all rose in January, each increasing 0.2 percent. Within the food group, the index for food away from home increased while the index for food at home was unchanged; within the energy group the gasoline index increased while the index for household energy declined.

Within all items less food and energy, the apparel index rose sharply, and the indexes for shelter, recreation, medical care, and tobacco increased as well. The indexes for used cars and trucks and for airline fares both declined, while the new vehicles index was unchanged.

The all items index has risen 2.9 percent over the last 12 months, a slight decrease from last month's 3.0 percent figure. The index for energy has risen 6.1 percent over the last year and the food index 4.4 percent; both figures are slight declines from last month. The index for all items less food and energy has risen 2.3 percent, its largest 12-month increase since September 2008.  More...

The Briefing.com consensus forecast was for 0.3% for Headline and 0.1% Core month-over-month. The actual was 0.2% Headline and 0.2% 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, a pattern that began changing last October as headline inflation declined while core has continued to rise.



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.