We expect the November estimate of the consumer price index to show a 0.3% monthly increase in the top-line monthly index with a 0.2% advance in the core metric that excludes the more volatile food and gasoline categories.
Those increases should translate to 3% rise from a year ago in both the top-line and core readings when the Bureau of Labor Statistics releases the data on Thursday.
Given the lack of recent inflation data because of the government shutdown, we think that there is a modest risk of inflation advancing to a 3.1% rate from a year ago and core inflation rising at a modestly stronger pace than our 0.2% monthly forecast.
Because the BLS is not publishing an October estimate, we think the primary focus within the index should be on the services category, which rose by 3.6% annually in September and services excluding energy, which increased by 3.5% from a year ago through September.
It is not just tariffs that are sending prices higher. It is also stubborn and sticky service sector inflation, which is offsetting the disinflation elsewhere in the economy.
It’s important to note that in the eyes of consumers, inflation is a function of food, fuel, utilities and housing. Once one adds education and health care, the notion of 3% inflation may seem quaint or somewhat unbelievable to households in the middle or lower-income categories.
Get Joe Brusuelas’s Market Minute economic commentary every morning. Subscribe now.
It is equally important to remember that we will get turn-of-the-year price increases in both the CPI and also in the personal consumption expenditures index, the Federal Reserve’s preferred measure of inflation.
Whatever solace is found within the November CPI estimate will most likely fade quickly as turn-of-the-year increases in housing prices, services, goods and foodstuffs drive the affordability narrative.
While inflation at 3% for an economist means a doubling of the price level in 24 years, in contrast with the 36 years associated with the Fed’ s 2% inflation target, it means something quite different for the worker who is experiencing sluggish wage growth and a lack of job opportunities.
That is, for households that have sustained a 23.5% increase in the price level since January 2021, the current inflation environment can be fairly defined as an affordability crisis.
