Consumer Price Index: Rises Yet Again on Gas and Shelter

The Bureau of Labor Statistics released the November Consumer Price Index data this morning. The year-over-year nonseasonally adjusted Headline CPI came in at 1.69%, up fractionally from 1.64% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 2.11%, essentially unchanged from the previous month's 2.14%.

Here is the introduction from the BLS summary, which leads with the seasonally adjusted monthly data:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in November on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.7 percent before seasonal adjustment.

The shelter and gasoline indexes continued to rise in November, and were again the main reasons for the seasonally adjusted all items increase. The shelter index advanced 0.3 percent in November, while the gasoline index increased 2.7 percent.

The food index was unchanged in November, as the index for food at home fell 0.1 percent, its seventh consecutive decline. The energy index increased 1.2 percent, although gasoline was the only major energy component index to increase over the month.

The index for all items less food and energy rose 0.2 percent in November after rising 0.1 percent in October. The shelter index accounted for most of the increase, but the indexes for motor vehicle insurance, education, communication, and used cars and trucks also rose. The medical care index was unchanged over the month. Several indexes declined in November, including apparel, household furnishings and operations, airline fares, and new vehicles. [More…]

Investing.com was looking for a 0.2% increase MoM in seasonally adjusted Headline CPI and 0.2% in Core CPI. Year-over-year forecasts were 1.7% for Headline and 2.2% for Core.

The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since the turn of the century. The highlighted two percent level is the Federal Reserve's Core inflation target for the CPI's cousin index, the BEA's Personal Consumption Expenditures (PCE) price index.

Headline and Core CPI since 2000

The next chart shows both series since 1957, the year the government first began tracking Core Inflation.

Headline and Core CPI

In the wake of the Great Recession, two percent has been the Fed's target for core inflation. However, at their December 2012 FOMC meeting, the inflation ceiling was raised to 2.5% while their accommodative measures (low Fed Funds Rate and quantitative easing) were in place. They have since reverted to the two percent target in their various FOMC documents.

Federal Reserve policy, which in recent history has focused on core inflation measured by the core PCE Price Index, will see that the more familiar core CPI is above the PCE target range of 2 percent.