Prices were in focus this week with reports delivering the last key data before the FOMC's next meeting on December 17-18. The November readings on consumer and producer prices suggested that overall inflation remains stubbornly high. The Consumer Price Index rose 0.3%, which pushed the year-over-year rate up to a four-month high of 2.7%. A sharp pickup in grocery store prices and the end of a multi-month slide in gasoline prices contributed to the headline's strength, but excluding food and energy, inflation also looked sticky with the core advancing 0.3% for a fourth consecutive month. The core index is up 3.3% year-over-year and has been stuck in the narrow range of 3.2%-3.3% since last June.
The sideways trend in headline and traditional core inflation in recent months masks some shifts under the surface. Goods inflation picked up again in November and, when measured on a year-ago basis, has turned higher since the late summer (chart). The upswing comes as food and energy prices are no longer benefiting from the unwinding of the commodity price spikes that occurred in 2022. Among core goods, the deflationary impulse stemming from healed supply chains and rebalanced demand has petered out. Yet, services inflation continues to gradually subside. Cooler growth in input costs—both labor and physical inputs—has helped non-housing services inflation to ease further, while the normalization in private-sector rent growth is slowly but surely being reflected in official measures of shelter inflation.
November's strength in inflation may have been overstated somewhat by temporary factors. For example, that Thanksgiving fell this year on the latest possible calendar date may have delayed promotional activity at grocery stores and other retailers, contributing to another rise in goods prices on a seasonally-adjusted basis. Meantime, the need to replace vehicles destroyed by Hurricanes Helene and Milton helped to fuel the jumps in new and used car prices (up 0.6% and 2.0% over the month, respectively). Encouragingly, alternative measures of core CPI inflation suggest that, while price growth remains uncomfortably strong, inflation continued to ease on trend through November (chart). The Cleveland Fed's Median CPI and the Atlanta Fed's Sticky CPI inflation readings both moved lower on a year-over-year basis and over the past three months have advanced at a slower pace than the traditional core index.
This Week's State Of The Economy - What Is Ahead? - 06 March 2020
Wells Fargo Economics & Financial Report / Mar 07, 2020
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This Week's State Of The Economy - What Is Ahead? - 25 September 2020
Wells Fargo Economics & Financial Report / Sep 28, 2020
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This Week's State Of The Economy - What Is Ahead? - 27 August 2021
Wells Fargo Economics & Financial Report / Aug 30, 2021
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This Week's State Of The Economy - What Is Ahead? - 02 August 2024
Wells Fargo Economics & Financial Report / Aug 06, 2024
The July employment report brought with it a crossing of the Sahm Rule threshold. That means we\'re either headed for recession, or about to break yet another recession rule this unique cycle. Either way, the Fed is getting ready to cut.
This Week's State Of The Economy - What Is Ahead? - 27 January 2023
Wells Fargo Economics & Financial Report / Jan 28, 2023
Real GDP expanded at a 2.9% annualized pace in Q4. While beating expectations, the underlying details were not as encouraging. Moreover, the weakening monthly indicator performances to end the year suggest the decelerating trend will continue in Q1.
This Week's State Of The Economy - What Is Ahead? - 13 May 2022
Wells Fargo Economics & Financial Report / May 18, 2022
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This Week's State Of The Economy - What Is Ahead? - 27 October 2023
Wells Fargo Economics & Financial Report / Nov 02, 2023
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This Week's State Of The Economy - What Is Ahead? - 29 March 2024
Wells Fargo Economics & Financial Report / Apr 03, 2024
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This Week's State Of The Economy - What Is Ahead? - 10 September 2020
Wells Fargo Economics & Financial Report / Sep 12, 2020
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This Week's State Of The Economy - What Is Ahead? - 11 March 2022
Wells Fargo Economics & Financial Report / Mar 16, 2022
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