Skip to main content

The price of gasoline is shown on a pump at an Arco gas station in San Diego on July 11, 2018.

Mike Blake/Reuters

U.S. consumer prices increased solidly in November, which together with labour market strength could support the Federal Reserve’s intention to keep interest rates steady indefinitely after reducing borrowing costs three times this year.

The report from the Labor Department on Wednesday also showed underlying inflation firming last month.

The U.S. central bank held rates unchanged on Wednesday amid expectations the economy will continue to grow moderately next year and unemployment remain low. The Fed again signalled a pause in the easing cycle that started in July when it cut rates for the first time since 2008.

Story continues below advertisement

“There are no worrisome deflation undercurrents in this economy and Fed officials do not need to cut interest rates further to boost economic demand,” said Chris Rupkey, chief economist at MUFG in New York.

The consumer price index rose 0.3% last month as households paid more for gasoline and electricity, and food prices increased for a third consecutive month. The CPI advanced 0.4% in October. In the 12 months through November, the CPI shot up 2.1% after gaining 1.8% in October.

Economists polled by Reuters had forecast the CPI climbing 0.2% in November and rising 2.0% on a year-on-year basis.

Excluding the volatile food and energy components, the CPI rose by 0.2%, matching October’s increase. The so-called core CPI was up by an unrounded 0.2298% last month compared to 0.1572% in October. The core CPI was lifted by gains in health care and prices of used cars and trucks, recreation and hotel and motel accommodation.

In the 12 months through November, the core CPI increased 2.3% after a similar gain in October.

The Fed tracks the core personal consumption expenditures (PCE) price index for its 2.0% inflation target, which is lagging other inflation measures. The core PCE price index rose 1.6% on a year-on-year basis in October and has undershot its target this year.

November PCE price data will be published later this month.

Story continues below advertisement

The wide gap between the core PCE price index and core CPI exists because housing and health care have different weightings in each inflation measure. Even with the CPI perking up, the outlook for inflation remains benign.

In a separate report on Tuesday, the Atlanta Fed said its sticky-price consumer price index (CPI), a weighted basket of items that change price relatively slowly, rose 2.6% on an annualized basis in November after increasing 3.3% in October. It was up 2.8% year-on-year in November.

The dollar was steady against a basket of currencies, while U.S. Treasury prices rose. Stocks on Wall Street were trading slightly higher.

RISING RENTS

November’s firmer inflation readings followed a report last Friday showing the economy added a robust 266,000 jobs in November and the unemployment rate fell back to 3.5%, its lowest level in nearly half a century. Other data on housing, trade and manufacturing have also been relatively upbeat, and suggested the economy was growing at moderate speed rather than stalling.

“The economy appears well positioned to find its footing and extend the expansion into 2020,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.

In November, gasoline prices rose 1.1% after rebounding 3.7% in October. Prices for food as well as food consumed at home edged up 0.1%. Core goods prices were unchanged last month, despite U.S. tariffs on merchandise imported from China.

Story continues below advertisement

The cost of core services rose 0.3% after increasing 0.2% in October. Owners’ equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, increased 0.2% last month, matching October’s rise.

The rent index gained 0.3% after edging up 0.1% in October, which was the smallest gain since April 2011. It was lifted by a 1.1% rebound in the cost of hotel and motel accommodation after tumbling 3.8% in October.

Healthcare costs rose 0.3% in November after surging 1.0% in October, which was the most since August 2016. The cost of hospital services rose 0.3% last month and prices for doctor visits gained 0.1%. But prices for prescription medication slipped 0.1% after surging 1.8% in October.

Apparel prices nudged up 0.1% last month after declining 1.8% in October. Used motor vehicle and truck prices increased 0.6% after rising 1.3% in October. The cost of recreation goods and services increased 0.4%, boosted by rises in the prices of cable and satellite television services and sporting goods.

But new vehicle prices fell for a fifth straight month, likely because of deep discounting by auto makers trying to get rid of stocks of older models. There were also decreases in the prices of airline tickets and motor vehicle insurance. The cost of household furnishing and operations was unchanged.

Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter
To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies