November CPI

According to the Commerce Department’s index, consumers saw prices rise 0.4% for the month of November, matching consensus expectations.  This compares to the 0.3% gain we saw in October.  As is so often the case, the biggest culprit was a large jump in energy costs.  Year-over-year the CPI made a huge upward leap from a negative 0.2% rate of decline posted for October to a current 1.9% gain.  If you were a member of the group fearing deflation, October’s small negative pace compared quite favorably to September’s 1.3% negative drop.  Given the rapid rise seen over the last two months though, will we now hear commensurate concerns from inflation hawks?  A glance at the core CPI numbers which eliminate food and energy prices may help enlighten us in that regard.  For November the core rate was unchanged, having risen just 0.2% in October, and currently remains at a positive 1.7%, still within the range the Federal Reserve supposedly considers tolerable.  The fact that we didn’t see a similar two-month spike in the core evidenced by the headline report suggests the remarkable volatility of oil prices we saw a year ago are playing a significant role, contributing to the difference between the two.  Since this single factor still must play itself out, here at Atlas Indicators we won’t be surprised to see the headline CPI continue its climb for another month or two.  We will keep an eye on the core rate where we do not expect to find confirmation that inflation is truly taking hold.