U.S. Consumer Prices Rose 0.4% in November -- Update
14 December 2017 - 4:25AM
Dow Jones News
By Sarah Chaney
WASHINGTON -- A bump in energy prices boosted U.S. consumer
prices in November, but that masked a softening in underlying
inflation trends.
The consumer-price index, which measures what Americans pay for
everything from breakfast cereal to doctors' visits, increased 0.4%
in November from the prior month, the Labor Department said
Wednesday. Overall prices climbed 2.2% in November from a year
earlier.
The headline rise was underpinned by a 3.9% increase in the
energy prices. Excluding the volatile categories of food and
energy, so-called core prices rose a more sluggish 0.1%, a slowdown
from the previous month's 0.2% increase. The year-over-year rate
for core prices dropped to 1.7%, following a rise to 1.8% in
October.
The Federal Reserve targets 2% inflation. Many inflation
measures softened earlier this year and haven't yet picked up as
top Fed officials were anticipating. However, economists said the
pickup could be coming, with the economy expanding at a robust rate
and joblessness falling to 17-year lows.
"If another rate increase is announced today as expected, (does
the Fed) back off of that pace next year given that inflation,
while looking a little bit better on trend, is still below where
they want it to be?" said Sarah House, economist at Wells
Fargo.
Core prices excluding food and energy were dragged down by a
decline in clothing prices, which fell 1.3% in November, the
largest decrease in nearly two decades and possibly a result of
earlier holiday discounting this season. Shelter prices grew 0.2%
from a month earlier, compared with a 0.3% rise in the previous two
months.
Physician prices declined 1.8% in the 12 months through
November, the biggest drop since record-keeping began in 1947. The
trend continued in November, with prices falling 0.8% from a month
earlier.
Steve Reed, economist at the Labor Department, said the
department has received lower response rates in the physicians'
services category over the last several years. Doctors who do
respond are more willing to report self-paid prices than
private-insurance prices, meaning the data the department collects
aren't necessarily representative of the actual prices. That could
be skewing these measures.
Certain categories that had shown weakness earlier in the year,
including cellphone services and prescription drugs, increased in
November. Used vehicle prices increased 1%, lifted by demand to
replace hurricane-destroyed vehicles.
The report is the Federal Reserve's last peek at a major
inflation gauge before the central bank's two-day policy meeting
concludes Wednesday afternoon. Central bank officials are likely to
look through the uncertain inflation outlook and raise interest
rates by a quarter-percentage point, the fifth such increase since
the Fed began raising rates from near zero two years ago.
The consumer-price index tends to run a little bit higher than
the Fed's preferred measure of inflation, the personal-consumption
index, reflecting different methods for calculating inflation. Both
gauges have followed the same pattern.
The price index for personal-consumption expenditures rose 1.6%
in October from a year earlier, the Commerce Department earlier
said. That annual inflation reading has remained below the Fed's 2%
target for the best part of 5 1/2 years.
Persistently low inflation readings could complicate officials'
decisions on how quickly to raise interest rates in 2018 and
beyond.
Chicago Fed President Charles Evans said in a speech in London
last month that price growth has been too lackluster.
"I'm concerned something more persistent is holding down
inflation today. Namely, I feel we are facing below-target
inflation expectations, " Mr. Evans said.
Write to Sarah Chaney at sarah.chaney@wsj.com
(END) Dow Jones Newswires
December 13, 2017 12:10 ET (17:10 GMT)
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