- by New Deal democrat
A truncated version of the CPI was reported for November this morning. Since no data was collected for October, the monthly change in those values was not calculated, the Census Bureau apparently having elected not to publish with the cumulative two month changes since September. Nevertheless, the two month numbers are easily calculated, and the important ones are all the same: headline, core, shelter, and headline minus shelter all rose 0.2% in the last two months.
All of which means any calculations except for YoY ones have to be taken with numerous grains of salt. The only exceptions are for data that was privately collected and then integrated into the calculations, which were not affected by by the government shutdown.
With those caveats out of the way, by far the most important component of the CPI this month was shelter, and in particular the sharp deceleration in its YoY increase. Actual rent YoY declined from a 3.6% increase in September to 3.0% in November. Imputed Owner’s Equivalent Rent decelerated from a 3.8% YoY increase in September to 3.4% in November. The total for shelter decreased from 3.6% to 3.0%. Note that in the graph below the November readings do not appear:
All of these are the lowest since summer 2021, and are in line with their pre-pandemic ranges. And they are very big declines for only two months, so I am treating them with extra caution. It would not surprise me at all to see a signficant revision of these numbers next month.
This big decline in the shelter component of CPI, which is over 1/3rd of the entire calculation, is what drove the headline and core numbers down. YoY headline inflation was only 2.6%, the lowest since July, and core inflation YoY was 2.6%. YoY inflation ex-shelter was 2.5%:
All of these are equivalent to their readings back in July, i.e., lower than either August or September.
Collection of data for new and used vehicles was not affected by the shutdown. New vehicle prices rose 0.1% in October and 0.2% in November. Used vehicle prices rose 0.7% in October and 0.3% in November. As a result their YoY increases were 3.6% and 0.6% respectively:
Another recent problem child for inflation was transportation services, mainly vehicle parts and repairs as well as insurance. These also have gone somnolent, with an incrrease of only 1.7% YoY, the lowest since early 2021:
Finally, prices for gas home service, and electricity have also become a problem, the latter likely a side effect of the building of massive data centers for AI generation. Electricity prices were up 6.9% YoY in November, the highest increase since 2008 except for the post-pandemic inflation:
This has already created a backlash, and I expect that backlash to intensify.
In summary, November’s CPI report covering two months showed a big slowdown in all major components of consumer inflation, and in particular that for shelter. This in turn drove the YoY comparisons back down to where they were last summer. That being said, treat this month’s report with extra caution, and look out for significant revisions next month.
