On re-spiking motor vehicle prices, jumping food & gasoline prices. But housing inflation backs off.
By Wolf Richter for WOLF STREET.
The overall Consumer Price Index rose by 0.31% (+3.8% annualized) in November from October, the sharpest increase since April. It has been accelerating since June (blue).
The three-month average jumped by 3.0% annualized, also the sharpest increase since April, and the fourth month-to-month acceleration in a row:
On a year-over-year basis, CPI rose by 2.75% in November, the second month in a row of acceleration, up from 2.60% in October.
The Core CPI, which excludes food and energy components to track underlying inflation, rose by 3.32% year-over-year. It has been in this range for the sixth month in a row, and above where it had been in June.
The major components, year-over-year:
- Overall CPI: +2.75% (yellow).
- Core CPI +3.32% (red).
- Core Services CPI: +4.58% (blue).
- Durable goods CPI: -2.01% (green).
Month-to-month “Core” CPI rose by 0.31% (+3.8% annualized) in November from October. Over the past four months, core CPI has risen in this range of +3.4% to +3.8% annualized, the biggest increases since March (blue in the chart below).
The 3-month average “core” CPI accelerated to +3.7% annualized, the fourth month of acceleration in a row, and the highest since April (red).
The sharp price increase of used vehicles in November, the third month in a row of price increases, was a big factor in the stubbornly high and accelerating core CPI rate, having U-turned from a historic plunge that until mid-2024 had been one of the big factors in the cooling of core inflation.
Used vehicles, on a month-to-month basis, are now fueling inflation, and we have seen that for months beneath the surface in rising used-vehicle wholesale prices, very tight inventories, and strong demand (stimulated by the plunge in prices from early 2022 till mid-2024).
The 6-month average “core” CPI – which irons out most of the month-to-month squiggles but lags further behind – accelerated to +2.9% (red):
“Core services” CPI.
The core services CPI decelerated to +3.4% annualized in November from October (blue line in the chart below), which cooled the 3-month average to +4.0%.
The 6-month core services CPI, which irons out a lot of the month-to-month squiggles, accelerated to 3.7% annualized (red).
The housing components of core services.
The Owners’ Equivalent of Rent CPI decelerated sharply to +2.8% annualized in November from October (blue in the chart below). The three-month average decelerated to +3.9% annualized (red). Both of these increases were the lowest since 2021, after the sharp increases in the prior months.
OER indirectly reflects the day-to-day expenses of homeownership: homeowners’ insurance, HOA fees, property taxes, and maintenance. It is based on what a large group of homeowners estimates their home would rent for, with assumption that a homeowner would want to recoup their cost increases by raising the rent.
It accounts for 27% of overall CPI and estimates inflation of shelter as a service for homeowners – as a stand-in for the costs that homeowners pay for, such as interest, homeowner’s insurance, HOA fees, maintenance, and property taxes.
Rent of Primary Residence CPI decelerated to +2.6% annualized in November from October (blue in the chart below). The 3-month rate decelerated to +3.2%. Both of them were the lowest since 2021.
Rent CPI accounts for 7.7% of overall CPI. It is based on rents that tenants actually paid, not on asking rents of advertised vacant units for rent. The survey follows the same large group of rental houses and apartments over time and tracks the rents that the current tenants, who come and go, paid in rent for these units.
Year-over-year, both continued to decelerate: OER CPI +4.9% (red), Rent CPI +4.4% (blue):
“Asking rents…” The Zillow Observed Rent Index (ZORI) and other private-sector rent indices track “asking rents,” which are advertised rents of vacant units on the market for rent. Because rentals don’t turn over that much, the spike in asking rents through mid-2022 never fully translated into the CPI indices because not many people actually ended up paying those jacked-up asking rents.
For October, the ZORI (seasonally adjusted) rose by 0.24% month-to-month and by 3.3% year-over-year. Zillow has not yet released the November figures.
The chart shows the CPI Rent of Primary Residence (blue, left scale) as index value, not percentage change; and the ZORI in dollars (red, right scale). The left and right axes are set so that they both increase each by 55% from January 2017.
Since January 2017, the ZORI has soared by 50%, and the CPI Rent by 41%. Since January 2020, the ZORI has soared by 33% and the CPI rent by 26%.
Rent inflation vs. home-price inflation: The red line in the chart below represents the CPI for Rent of Primary Residence as index value. The purple line represents Zillow’s “raw” Home Value Index for the US. Zillow has not yet released the November data [for charts of each of the largest, most expensive 30 metros, check out The Most Splendid Housing Bubbles in America ]. Both indexes are set to 100 for January 2000:
The CPI for motor-vehicle maintenance & repair ticked up by 2.4% annualized in October from November, after having spiked by 13% and 12% annualized in the prior two months.
Year-over-year, the index rose by 5.7%, after the 5.8% increase in October, both of which are the highest since June.
Since January 2020, it has spiked by 39% as the costs of labor and replacement parts have surged.
The CPI for motor vehicle insurance rose by 1.6% annualized in November from October, after a dip in October, and a 15% annualized spike in September.
Year-over-year, it rose by 12.7%. Since January 2022, it exploded by 51%.
The massive inflation in motor vehicle insurance was fueled initially by the spike in repair costs and used-vehicle prices (replacement values) in 2021 and 2022, though used-vehicle prices have plunged since then. Since 2023, insurers were able to increase their profit margins by increasing their premiums even as replacement costs plunged.
Food away from Home CPI rose by 3.4% annualized (+0.28% not annualized) in November from October.
Year-over-year, it rose by 3.6%, the smallest increase since August 2020. Since January 2020, it has surged by 29%.
Often called food services, the category includes full-service and limited-service meals and snacks served away from home, such as in restaurants, cafeterias, at stalls, etc.
| Major Services ex. Energy Services | Weight in CPI | MoM | YoY |
| Core Services | 65% | 0.3% | 4.8% |
| Owner’s equivalent of rent | 27.1% | 0.2% | 4.9% |
| Rent of primary residence | 7.7% | 0.2% | 4.4% |
| Medical care services & insurance | 6.5% | 0.4% | 3.7% |
| Food services (food away from home) | 5.4% | 0.3% | 3.6% |
| Education and communication services | 5.0% | -0.2% | 1.8% |
| Motor vehicle insurance | 3.0% | 0.1% | 12.7% |
| Admission, movies, concerts, sports events, club memberships | 1.8% | 1.2% | 4.1% |
| Other personal services (dry-cleaning, haircuts, legal services…) | 1.5% | 0.4% | 4.2% |
| Lodging away from home, incl Hotels, motels | 1.4% | 3.2% | 3.7% |
| Motor vehicle maintenance & repair | 1.3% | 0.2% | 5.7% |
| Public transportation (airline fares, etc.) | 1.1% | 0.0% | 2.9% |
| Water, sewer, trash collection services | 1.1% | 0.6% | 5.2% |
| Video and audio services, cable, streaming | 0.9% | 0.7% | 3.5% |
| Pet services, including veterinary | 0.4% | 0.6% | 7.1% |
| Tenants’ & Household insurance | 0.4% | 0.0% | 2.0% |
| Car and truck rental | 0.1% | -3.0% | -8.0% |
| Postage & delivery services | 0.1% | -0.1% | 9.8% |
The Core services CPI overall has risen by 23% since January 2020.
Durable goods.
New and used vehicles dominate this category, followed by information technology products (computers, smartphones, home network equipment, etc.), appliances, furniture, fixtures, etc. All categories experienced price declines starting in late 2022, after the price spike during the pandemic. But the sharp month-to-month price declines in motor vehicles ended in September, and prices have risen since then.
The used vehicle CPI jumped by 2.0% not annualized in November from October (+27% annualized), seasonally adjusted, the third month-to-month increase in a row (red).
Not seasonally adjusted, the index jumped by 8.5% annualized in November from October (blue).
On a year-over-year basis, the index was down 3.4%, compared to the 10%-plus drops over the summer.
The plunge of used vehicle prices from early 2022 through mid-2024 was a powerful contributor to the cooling of core CPI. But it has ended.
New vehicles CPI jumped by 0.58% not annualized (+7.2% annualized) in November from October, seasonally adjusted, having now increased in three of the past four months (red).
This whittled down the year-over-year drop to just 0.7%. Since January 2020, the index is up 19%.
New-vehicle prices have been sticky after the surge from in 2021 through early 2023 and have only given up a little ground since the peak, unlike used-vehicle prices, despite the glut of new vehicles now on many lots. The big incentives and discounts that have been getting thrown around in recent months to move their inventory mostly just undid the big increases in MSRPs of the 2023 and 2024 model years.
| Major durable goods categories | MoM | YoY |
| Durable goods overall | 0.2% | -2.0% |
| New vehicles | 0.6% | -0.7% |
| Used vehicles | 2.0% | -3.4% |
| Information technology (computers, smartphones, etc.) | -2.0% | -7.1% |
| Sporting goods (bicycles, equipment, etc.) | -0.3% | -2.8% |
| Household furnishings (furniture, appliances, floor coverings, tools) | 0.7% | -1.0% |
Food Inflation.
The CPI for “Food at home” jumped by 5.8% annualized in November from October (+0.47% not annualized). That’s the second month of the past three months with big increases like this.
This caused the year-over-year rate to rise to +1.6%, the most in a year, on top of the already aggravatingly high prices. The CPI for food at home is up by 27% since January 2020.
Food at home includes food purchased at stores and markets and eaten off premises.
Note how the bird flu outbreak is once again hitting egg prices, up by 37% from a year ago:
| MoM | YoY | |
| Food at home | 0.5% | 1.6% |
| Cereals, breads, bakery products | -1.1% | -0.5% |
| Beef and veal | 3.1% | 5.0% |
| Pork | 1.2% | 1.7% |
| Poultry | -0.5% | 0.4% |
| Fish and seafood | 0.1% | -1.7% |
| Eggs | 8.2% | 37.5% |
| Dairy and related products | 0.1% | 1.2% |
| Fresh fruits | 0.0% | 1.3% |
| Fresh vegetables | 1.0% | 1.6% |
| Juices and nonalcoholic drinks | 1.6% | 3.1% |
| Coffee, tea, etc. | 2.1% | 1.9% |
| Fats and oils | 0.0% | 1.9% |
| Baby food & formula | -0.1% | 1.2% |
| Alcoholic beverages at home | 1.5% | 2.8% |
Apparel and footwear.
Month-to-month, the CPI for apparel and footwear ticked up in November from October, and year-ov-year was up by 1.1%.
Apparel and footwear are components of nondurable goods, along with food, energy products, household supplies, personal care items, and other stuff.
Energy.
The CPI for energy, which covers energy products and services that consumers buy and pay for directly, inched up only a little in November from October, and was down year-over-year. About half of the energy CPI is gasoline, which rose on a month-to-month basis, but was still down 8.1% from a year ago.
| CPI for Energy, by Category | MoM | YoY |
| Overall Energy CPI | 0.2% | -3.2% |
| Gasoline | 0.6% | -8.1% |
| Electricity service | -0.1% | 3.1% |
| Utility natural gas to home | 1.0% | 1.8% |
| Heating oil, propane, kerosene, firewood | 0.4% | -10.7% |
Gasoline prices rose in November from October seasonally adjusted (red), but fell not seasonally adjusted as they nearly always do this time of the year (blue).
Year-over-year, gasoline prices were still down 8.1%. Compared to the peak in the summer of 2021, they were down by 32% (seasonally adjusted).
The plunge in gasoline prices since mid-2022 was a big factor in the deceleration of the overall CPI since then, though now overall CPI has started to rise again:
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.
Inflation doesn’t matter we will melt up get on Elon’s rocket fellas we are going to the mooon 🚀🚀🚀
Mars.
Moon is old hat. I was a kid when folks started traipsing around on the moon. “To the moon” with stocks means taking the Dow back to 800, where it had been in 1969 when folks went to the moon?
Everything I’m reading is saying 98% chance of a .25 cut next week.
Am I missing something? What in this data suggests that interest rates are too high?
Not much..it is what they anticipate what’s coming.
A replay of history possibly coming our way. In the early 70s, post war Vietnam, inflation was running slightly hot. President Nixon was cajoling Fed chair Arthur Burns to cut interest rates and against his better judgment, he did, as I recall. It wasn’t long before the “great inflation” started and it would take draconian efforts by another fed chairman (Volker) in the 80s to finally get it somewhat under control. We had better hope they do not cut interest rates any time soon. The one thing we will learn from history is we don’t learn anything from history.
Nixon got his ’72 reelection and then, with some lag, oil supply shocks drove inflation deeper and longer. In 2018 or so, Powell was starting to “normalize” to higher rates, hen Trump jawboned him ad that ended. Then with some lag, the pandemic arrived, with supply shocks, federal spending and rate cuts and so on, driving inflation to the surface, to now. All we need now is some kind of shock next year, to see something in that nature happen again. And shocks happen often enough. There may be some self-induced ones (Tariffs? labor supply reduction?)
Question – is that last 1.0% of inflation from 3.0% to 2.0% all that important to the economy, to the consumer? Is it important enough for the fed to change directions with rates?
Charles Dickens would say “yes”, as would anyone who can only afford 80-99% of their bills as a result of “just 1% more” on top of the ~25% since 2020…
Annual income twenty pounds, annual expenditure nineteen nineteen and six , result happiness.
Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery
Charles Dickens, David Copperfield
BG-
Your depiction is a useful analogy using a household budget.
Here’s a description of the pathology of a “monetary policy” induced system-wide inflation:
“Everyone loves an early inflation. The effects at the beginning of inflation are all good. There is steepened money expansion, rising government spending, increased government budget deficits, booming stock markets, and spectacular general prosperity, all in the midst of temporarily stable prices. Everyone benefits, and no one pays. That is the early part of the cycle. In the later inflation, on the other hand, the effects are all bad. The government may steadily increase the money inflation in order to stave off the latter effects, but the latter effects patiently wait. In the terminal inflation, there is faltering prosperity, tightness of money, falling stock markets, rising taxes, still larger government deficits, and still roaring money expansion, now accompanied by soaring prices and an ineffectiveness of all traditional remedies. Everyone pays and no one benefits. That is the full cycle of every inflation.”
—Jens O. Parsson (pen name of Ronald H. Marcks, 1931-2021), Dying of Money
I am a novice on this stuff but just from a common sense perspective it seems wise to wait and see and not cut rates right now. I just dont understand the rush to lower rates with unemployment historically low and inflation starting to go back up from their own professed goal of 2 percent that they never fully reached. The FED is slowly becoming nontrustworthy like the media. IMHO
the rush is that wall street and the government are tied at the tip. as they ask, so shall thy receive.
Must be reading different #s than Wolf is giving us. Makes no sense to cut rates looking at these numbers.
The Y/Y CPI is down since June 2022. Lower lows, lower highs. It plunged in one year from 9.1 in June 2022 to 3.0 in June 2023.
Thereafter the downthrust is more moderate, but still lower lows, lower highs. The CPI might cross zero next year. Will the Fed preempt ????
Just blowing off steam but its like the FED is one of those psycho parents with Munchausen Syndrome. They are trying to introduce a sickness (inflation) into the economy so they can step in and fix it over and over. Just read the data and apply the gas or brakes as needed.
1:04 PM 12/11/2024
Dow 44,148.56 -99.27 -0.22%
S&P 500 6,084.19 49.28 0.82%
Nasdaq 20,034.89 347.65 1.77%
VIX 13.58 -0.60 -4.23%
Gold 2,754.00 35.60 1.31%
Oil 70.29 1.70 2.48%