The November Consumer Price Index (CPI) report reflects a mixed but generally moderating inflationary landscape, with implications for the Federal Reserve's upcoming decision.
Key Highlights
- Headline Inflation: Rose by 0.3% in November, resulting in a 2.7% year-over-year increase, up from 2.4% in September.
- Core Inflation: Steady at 0.3% month-over-month for the fourth consecutive month, translating to a year-over-year rate of 3.3%.
- Sector Movements:
- Grocery Prices: Increased 0.5%, with eggs (+8.2%) and beef (+3.1%) leading the rise due to temporary factors like avian flu.
- Energy: Up 0.2%, with gas prices increasing 0.6% in November but still well below mid-2022 peaks.
- Housing: Posted its smallest rise since early 2021 at 0.2%.
Labor Market Resilience
Real wages continue to rise, reflecting a 21-month streak of inflation-adjusted gains. This trend alleviates the burden on households, with grocery costs now requiring fewer work hours than before the pandemic.
Expert Commentary
Jeff Schulze, Head of Economic and Market Strategy at ClearBridge Investments, provided insights into the implications of this morning’s CPI data:
“The debate for the FOMC next week between cut or skip is over after November’s core CPI release came at consensus expectations providing the necessary cover for the committee to proceed deeper into its easing cycle. While a 25bp cut was largely priced after last week’s dovish jobs report, today’s inflation release all but lock it in.”
“Core inflation has printed .3% m/m for four consecutive months, which has created some anxiety about stalling disinflation progress. However, the internals of this print were favorable, suggesting that upside risks to the near-term inflation outlook are limited. Goods inflation perked up with used car prices continuing to show resilience following last month’s hurricane related bump, but this should be less of a concern as we move into the new year and prices normalize. Finally, the slow grind lower in shelter inflation continued to play out last month which is an encouraging development.”
“This inflation print should be risk asset friendly and provide a tailwind to equity markets as we move through one of the strongest seasonal periods of the year. Long bonds should also benefit at the margin given fears that a higher inflation print could have materialized.”
