Inflation slowed significantly for a second month in November as prices for goods that surged during the pandemic continued to decline. Yet inflation remained high as the cost of many services continued to rise.
Consumer prices rose 7.1% from a year earlier, compared with a 7.7% rise in October and a 40-year high of 9.1% in June, as food prices soared and rents again offsetting lower gas prices, according to the Labor Department’s Consumer Price Index. .
The rise in inflation last month was the slowest since December last year. And it came in below expectations of 7.3%, which had been predicted by economists polled by Bloomberg.
On a monthly basis, consumer prices rose only 0.1% after rising 0.4% the previous month.
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What is the underlying consumer price index?
Core prices, which exclude volatile food and energy products and better reflect underlying trends, rose 0.2% from October, after rising 0.3% the previous month. This reduced the annual increase from 6.3% to 6%.
What is the stock market marker right now?
Better-than-expected inflation news sent stocks higher in early trading as investors expected the report to prompt the Federal Reserve to reverse its aggressive interest rate hikes aimed at containing increases of price. The Dow Jones Industrial Average jumped about 650 points, or nearly 2%, just after trading began at 9:30 a.m.
The Fed is expected to raise its key rate by half a percentage point on Wednesday after four consecutive three-quarter point hikes. Morgan Stanley is forecasting another quarter-point hike early next year before the central bank pauses.
“The worst inflation is most likely behind us, but high inflation is not over yet,” said Jason Schenker, president of Prestige Economics.
Generally, prices for goods such as used cars and furniture have fallen or stabilized as the supply chain issues triggered by COVID-19 have subsided. But prices for services have continued to rise as more Americans return to travel and other activities, and persistent labor shortages are growing.
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Why are gas prices dropping again?
Gasoline prices fell for the fourth time in five months amid recession fears and slowing global demand for oil. Prices at the pump fell 2%, but still rose 10% per year. They jumped in October on OPEC’s production cuts, but resumed their descent from record highs over the summer.
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Will food prices continue to rise?
Food prices are finally starting to moderate, but gradually, rising 0.5% from October and 12% over the past year. The cost of raw materials such as wheat and maize have fallen in recent months due to easing global demand, but rapidly rising wages for workers continue to drive up prices on supermarket shelves, Barclays wrote. in a research note.
In November, the price of cereals and bakery products jumped 1.1% from the previous month and 16.4% from the previous year. Bread prices increased by 2% and 15.7% per year. And egg prices are still up 2.3% and 49.1% from a year ago.
But some food costs that had been rising have fallen. Prices for uncooked ground beef fell 0.9%, bacon 1.8% and fresh fish and seafood 1.4%.
Restaurant prices also continued to rise, but less strongly, rising 0.5% after a 0.9% jump the previous month.
Many Americans are still feeling the long run up in food prices, not the recent moderation.
Oren Spiegler, 66, of Peters Township, Pennsylvania, says he’s somewhat relieved by lower gas prices, but that doesn’t make him feel much better about headline inflation.
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“I don’t see relief at the grocery store and I don’t see relief at restaurants,” he said. “I dine out quite often and can’t top the prices.”
At the supermarket, he forgoes eggs and other items whose prices have skyrocketed and replaces them with cheaper products, such as nuts. And on a recent visit to an upscale restaurant, the Italian Wedding Soup was listed at $9.99, up from $6.99 about a year ago. He and his wife have decided to eat only pizza.
“I can’t afford this,” he said. “I don’t feel good about it.”
Spiegler had been planning a trip to the Sarasota, Florida area to watch the Pittsburgh Pirates spring training games – until he found out the nightly rate for a hotel had dropped from $300 at $465 a few years ago.
Some other costs continued to climb. Rents have jumped 0.8% per month and 7.9% over the past year. Economists expect rents to fall, based on new leases, but not before the end of next year. Auto repair costs increased by 1.3% and 11.7% annually. And the price of a haircut has increased by 1.4% and 6.8% compared to a year ago.
But used car prices have continued to decline, falling 2.9%, and are now down 3.3% per year after rising significantly at the start of the health crisis. Air fares fell by 3%. Medical care services fell 0.7% due to lower insurance costs. And furniture fell 0.8%.