US core inflation stays firm with 4th straight 0.3% increase, fuels concern

The so-called core consumer price index - which excludes food and energy costs - increased 0.3% for a fourth straight month, Bureau of Labor Statistics figures showed Wednesday

By Augusta Saraiva:  US consumer prices continued to rise in November at a pace that is fueling concerns the progress toward taming inflation is stalling. 

The so-called core consumer price index — which excludes food and energy costs — increased 0.3 per cent for a fourth straight month, Bureau of Labor Statistics figures showed Wednesday. From a year ago, it rose 3.3 per cent. 

Traders continued to bet on a Federal Reserve interest-rate cut next week after the figures came in largely as expected.

Follow the reaction in real time here on Bloomberg’s TOPLive blog 

Economists see the core gauge as a better indicator of the underlying inflation trend than the overall CPI that includes often-volatile food and energy costs. The headline measure rose 0.3 per cent from the prior month and 2.7 per cent from a year before. Shelter costs accounted for nearly 40 per cent of the overall advance. 

 

While price pressures have subsided from a peak seen during the pandemic recovery, progress has leveled off more recently. That, along with receding concerns over the labor market, helps explain why several US central bankers have argued for a more gradual pace of interest-rate cuts. 

The CPI report showed goods costs excluding food and energy climbed 0.3 per cent, the most since May 2023 and fueled by higher prices for new and used vehicles as well as apparel. That category had been a large driver of disinflation over the past year and a half. 

Grocery prices jumped 0.5 per cent, the biggest advance since the start of last year. 

Shelter Costs 

Economists have paid close attention to shelter prices, the largest category within services and one of the most persistent sources of inflation in recent years. That metric advanced 0.3 per cent in November after a 0.4 per cent gain in the prior month. Owners’ equivalent rent as well as rent of primary residence — subsets of shelter — both edged up 0.2 per cent, the smallest gains since 2021. 

Excluding housing and energy, service prices rose 0.3 per cent for a second month, according to Bloomberg calculations. While central bankers have stressed the importance of looking at such a metric when assessing the overall inflation trajectory, they compute it based on a separate index. 

That measure — known as the personal consumption expenditures price index — doesn’t put as much weight on shelter as the CPI, which is one reason why it’s trending closer to the Fed’s 2 per cent target.  

A government report on producer prices due Thursday will offer insights into categories that feed directly into PCE, including health-care services, airfares and portfolio management. 

Policymakers also pay close attention to wage growth, as it can help inform expectations for consumer spending — the main engine of the economy. A separate report Wednesday that combines the inflation figures with recent wage data showed real hourly earnings grew 1.3 per cent from a year ago. 

Part of the reason why Fed officials have indicated they’re in no rush to lower borrowing costs is because they no longer believe the labor market to be a source of inflation.  

Looking ahead, it remains to be seen to what extent President-elect Donald Trump’s agenda will weigh on the trajectory of inflation. While consumers’ views of the economy and their finances have improved since he sealed his return to the White House, many economists say some of his campaign promises could put additional pressure on inflation. Some businesses, for example, are considering raising prices in anticipation of higher tariffs.