US CPI on the Rise while Core Inflation is Steady

Annualized consumer price inflation (CPI) continued to push higher in November as expected, though core inflation unexpectedly held steady, official data showed on Thursday.

U.S. consumer prices moderated in November, but the underlying trend continued to point to firming inflation pressures amid rising rents, which could support more interest rate increases from the Federal Reserve next year.

In a report, the U.S. Commerce Department said that consumer prices gained 0.2% in November from a month earlier, in line with expectations and compared to a 0.1% increase in the previous month.

On yearly basis, overall prices rose 1.7%, the strongest reading since October 2014 and matching expectations, while core prices were up 2.1% on the year, below the 2.2% expected.

The so-called core CPI, which strips out food and energy costs, rose 0.2 percent last month after edging up 0.1 percent in October. Rents accounted for most of the increase in the core CPI last month. Despite the increase, the year-on-year increase in the core CPI was unchanged at 2.1 percent.

The food index was unchanged in November for the fifth consecutive month. The food at home index fell 0.1 percent, while the index for food away from home increased 0.1 percent. Major grocery store food group indexes were mixed in November, with four declines and two increases. The food at home index declined 2.2 percent over the past year, with all six of the major grocery store food group indexes falling. The index for meats, poultry, fish, and eggs posted the largest decline over the span, decreasing 6.0 percent. The index for food away from home, in contrast, rose 2.3 percent over the past 12 months.

The energy index rose in November, increasing 1.2 percent after a 3.5 percent rise in October. The gasoline index, which rose 7.0 percent in October, increased 2.7 percent in November. The electricity index was unchanged in November after rising in each of the 4 previous months. The index for natural gas, which had also increased 4 months in a row, fell 0.4 percent in November. The energy index rose 1.1 percent over the past year, the largest 12-month increase since July 2014. The gasoline index rose 1.0 percent over the last year.

Elsewhere, there were significant upward pressures on services with transport services prices rising 0.4% for the month, due mainly to a strong increase in insurance costs, with a further 0.3% increase in shelter costs as rents continued to rise.

The dollar edged lower after the data with a very modest correction from heavy gains after the Fed statement with USD/JPY back below 118.00. Treasuries pared losses with the US10-year yield just below 2.60% with equity futures slightly lower.