Headline Consumer Price Index Declined in November, Biggest Monthly Drop since December 2008

December 17, 2014

by Doug Short

The Bureau of Labor Statistics released the November CPI data this morning. Year-over-year unadjusted Headline CPI came in at 1.32% (rounded to 1.3%), down from 1.7% (rounded to 1.66%) the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 1.70%, down from the previous month's 1.81% (rounded to 1.8%). The non-seasonally adjusted month-over-month Headline number was down 0.54% (rounded to -0.5%), and the Core number was down 0.07% (rounded to -0.1%). On a seasonally-adjusted basis, the all items index was down 0.3%.

The November decline in the headline number was the largest month-over-month drop since December 2008.

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

The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.3 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 increased 1.3 percent before seasonal adjustment.

The gasoline index posted its sharpest decline since December 2008 and was the main cause of the decrease in the seasonally adjusted all items index. The indexes for fuel oil and natural gas also declined, and the energy index fell 3.8 percent. The food index rose 0.2 percent with major grocery store food groups mixed.

The index for all items less food and energy increased 0.1 percent in November. The shelter index rose 0.3 percent, and the indexes for medical care, airline fares, and alcoholic beverages also rose. In contrast, the indexes for apparel, used cars and trucks, recreation, household furnishings and operations, personal care, and new vehicles all declined in November.

The all items index increased 1.3 percent over the last 12 months, a notable decline from the 1.7 percent figure from the 12 months ending October. The index for all items less food and energy has increased 1.7 percent over the last 12 months, compared to 1.8 percent for the 12 months ending October. The food index has risen 3.2 percent over the span. However, the energy index has declined 4.8 percent over the past 12 months, with the gasoline and fuel oil indexes both falling over 10 percent.   [More…]

Investing.com was looking for no change inHeadline CPI and a 0.2% increase for Core CPI. Year-over-year forecasts were 1.7% for both Headline and 1.8% 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. I've highlighted 2 to 2.5 percent range, which the Federal Reserve currently targets for the CPI's cousin index, the BEA's Personal Consumptions Expenditures (PCE) price index.

Click to View
Click for a larger image

The next chart shows both series since 1957, which was the first time the government began tracking the core inflation metric.

Click to View
Click for a larger image

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.

Federal Reserve policy, which has historically focused on core inflation as measured by the core PCE Price Index, will see that the more familiar core CPI has reached the PCE the target range of 2 to 2.5 percent.

Website by the Boston Web Company