US November CPI edges past forecasts, some see much higher inflation ahead

Consumer prices in the US rose a tad more quickly than expected last month on the back of broad-based gains which some economists said heralded much higher inflation over the course of 2021.

According to the Department of Labor, the year-on-year rate of change in the US consumer price index was unchanged in November from the month before at 1.2%.

Consensus had forecast a one tenth of a percentage point dip.

In comparison to the month before, headline inflation was 0.2% higher (consensus: 0.1%) as energy price gains picked up by 0.4%.

Core CPI, which strips out the more volatile components, such as food and energy, also printed ahead of forecasts, rising by 0.2% on the month and by 1.6% year-on-year (consensus: 1.5%).

Boosting prices was a big 1.8% on the month jump in transportation costs, alongside a 0.9% jump in those of fashion.

Prices for non-energy services by 0.2% and those for new vehicles and shelter meanwhile increased by 0.1%.

Used car and truck prices on the other hand fell by 1.3%, those of medical care commodities by 0.3% and those of medical care services by 0.1%.

Commenting on the implications of the latest CPI data, Ian Shepherdson at Pantheon Macroeconomics, highlighted the fact that CPI rose at all despite the drop in used car prices and the minimal rise in rents, with the latter accounting for 40% of core CPI.

"In any event, if home prices keep rising at anything like their recent pace, rent increases eventually will accelerate sharply," he said.

"[...] If rents rebound, as we expect, core CPI inflation will rise. We’re targeting 2.5% by the middle of next year, and 3% by the end of the year would be no surprise, assuming margins rebound across the services sector post-Covid. The Fed’s initial reaction will be that they positively want inflation to rise, but markets likely will be less sanguine."