Core CPI increased .08% on average between October and November, well below expectations, but likely reflects a large drag on the shelter components because of 1) methodological difficulties around the lack of October data and 2) drags on some core goods prices as a result of later-than-usual price collection in November.
The year-over-year core inflation rate, which excludes volatile food and energy prices, ticked down to 2.63% for November (from 3.02% in September).
Let’s take a closer look at Goldman Sachs Research’s breakdown of the latest data.
Airfares declined 3.4%, weighing on the core rate by 4 basis points, and health insurance—which featured a semiannual update of the underlying source data this month—declined 1.4% (not seasonally adjusted), implying a drag of about 1.3 basis points on monthly core CPI until the next source data update in April.
Core goods inflation was soft at 0.03% on average between October and November. Some of the weakness could reflect later-than-usual price collection, as the Bureau of Labor Statistics only collected prices in the second half of November when holiday promotions typically lead to lower prices, which is likely to be offset by higher measured inflation in December.
On average in October and November:
Recreation services prices declined 0.3%, partially reflecting an unusual 1% decline in club membership fees. Education and communication services prices increased 0.4%, and other personal services prices also increased 0.4%.
Headline CPI rose 0.10% on a two-month-average basis (2.74% year over year for November), reflecting a 0.5% increase in energy prices but flat food prices.
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