CPI Cools Significantly in November But Rent and Food Still Sharply Increasing

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1 percent in November on a seasonally adjusted basis.

Key Points

• The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1 percent in November on a seasonally adjusted basis, after increasing 0.4 percent in October, the U.S. Bureau of Labor Statistics reported today. 
• Over the last 12 months, the all items index increased 7.1 percent before seasonal adjustment.
• The index for shelter was by far the largest contributor to the monthly all items increase, more than offsetting decreases in energy indexes. 
• The food index increased 0.5 percent over the month with the food at home index also rising 0.5 percent. 
• The energy index decreased 1.6 percent over the month as the gasoline index, the natural gas index, and the electricity index all declined.
• The index for all items less food and energy rose 0.2 percent in November, after rising 0.3 percent in October. 
• The indexes for shelter, communication, recreation, motor vehicle insurance, education, and apparel were among those that increased over the month. 
• Indexes which declined in November include the used cars and trucks, medical care, and airline fares indexes.

CPI Shelter 

Shelter Key Points 

• Shelter is the largest component of the CPI with a weight of 32.7 percent. 
• The two largest components are OER and rent with respective weights of 24.0 percent and 7.4 percent.

Owners’ Equivalent Rent (OER) is the price one would pay to rent their own house from themselves, unfurnished, and without utilities. It is the single largest component of the CPI.

The BLS averages out rent and OER, but consumers take the hit all at once every month when they renew their lease.

CPI Year-Over-Year 

CPI Year-Over-Year Details

• CPI: 7.1 Percent
• Shelter: 7.1 Percent
• Core CPI (CPI Less Food and Energy): 6.0 Percent
• CPI Food and Beverage: 10.3 Percent

Energy 

• Energy skews the scales so badly that I leave it off my charts
• The energy index fell 1.6 percent in November after rising 1.8 percent in October.
• The gasoline index declined 2.0 percent over the month, following a 4.0-percent increase in October. 
• The index for natural gas continued to decline over the month, falling 3.5 percent after decreasing 4.6 percent in October. 
• The electricity index decreased 0.2 percent in November. 
• The energy index rose 13.1 percent over the past 12 months. 
• The gasoline index increased 10.1 percent over the span and the fuel oil index rose 65.7 percent. 
• The index for electricity rose 13.7 percent over the last 12 months, and the index for natural gas increased 15.5 percent over the same period.  

Year-over-year the CPI is decelerating but the Fed’s target is 2.0 percent.

Looking Ahead

It will be very difficult for the CPI to decline with shelter and food rising as much as they are, especially if energy stabilizes. If the price of energy jumps in December, there will be another month-over-month jump in the CPI.

Many expected the cost of shelter to decline significantly, but I was not one of them.

For shelter and rent analysis, please see Ignore the Pundits, Don’t Expect Big Declines in the Price of Rent

Also note Producer Prices Rise 0.3 Percent in November Led by Services and Food

This post originated at MishTalk.Com.

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