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Inflation eased again but stayed high in November, CPI report shows


Inflation throttled back significantly for a second month in November as prices for goods that surged during the pandemic continued to dip. Still, inflation remained elevated as the cost of many services kept marching higher.

Consumer prices increased 7.1% from a year earlier, down from a 7.7% rise in October and a 40-year high of 9.1% in June, as soaring food and rent costs again offset declining gas prices, according to the Labor Department’s Consumer Price Index.

The increase in inflation last month was at the slowest pace since December of last year. And it came in under expectations of 7.3%, which was predicted by economists surveyed by Bloomberg.  

On a monthly basis, consumer prices increased just 0.1% following a 0.4% rise the prior month. 

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What is core consumer price index?

Core prices, which exclude volatile food and energy items and better reflect underlying trends, increased 0.2% from October following a 0.3% bump the previous month. That lowered the annual increase from 6.3% to 6%.

What is the stock marker right now?

The better-than-expected news on inflation sent stocks soaring in early trading as investors anticipated the report will prompt the Federal Reserve to dial back its aggressive interest rate hikes aimed at corralling price increases. 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 interest rate by a half percentage point on Wednesday after four straight three-quarters point hikes. Morgan Stanley predicts another quarter-point increase early next year before the central bank pauses.

“The worst inflation is very likely behind us, but high inflation is not over yet,” said Jason Schenker, president of Prestige Economics.

Broadly, prices for goods such as used cars and furniture have been falling or stabilizing as COVID-19-triggered supply chain snarls have eased. But prices for services have continued to advance as more Americans return to traveling and other activities, and lingering worker shortages push up.

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Why are gas prices falling again?

Gas prices declined for the fourth time in five months amid recession concerns and softening global demand for oil. Pump prices dropped 2% but were still up 10% annually. They jumped in October on OPEC production cutbacks but have resumed their descent from record levels over the summer.

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Are food prices going to keep going up?

Grocery prices are finally starting to moderate, but just gradually, rising by 0.5% from October and 12% over the past year. The cost of commodities such as wheat and corn have fallen in recent months on easing global demand but rapidly climbing wages for workers are still pushing up prices on supermarket shelves, Barclays wrote in a research note.

In November, the price of cereal and bakery products jumped 1.1% from the previous month and 16.4% from a year earlier. Bread prices rose 2% and 15.7% annually. And egg prices increased another 2.3% and 49.1% from a year ago.

But some food costs that had been surging dipped. Uncooked ground beef prices fell 0.9%, bacon dropped 1.8%, and fresh fish and seafood declined 1.4%.

Restaurant prices also continued to rise but less sharply, increasing 0.5% after a 0.9% leap the prior 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 the drop in gas prices but it’s not making him feel much better about inflation overall.

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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 frequently and I can’t get over the prices.”

At the supermarket, he’s forgoing eggs and other items whose prices have soared and substituting cheaper products, like walnuts. And at a recent visit to an upscale restaurant, Italian wedding soup was listed at $9.99, up from $6.99 about a year ago. He and his wife decided to just have pizza.

“I can’t pay that,” he says. “I just don’t feel good about it.”

Spiegler had been planning a trip to the Sarasota, Florida, area to watch Pittsburgh Pirates spring training games – until he found the nightly rate a hotel had jumped to $465 from $300 a couple of years ago.  

Some other costs continued to climb. Rent leaped 0.8% monthly and 7.9% over the past year. Economists expect rents to fall, based on new leases, but not until later next year. Car repair costs rose 1.3% and 11.7% annually. And the price of a haircut increased by 1.4% and 6.8% from a year ago.

But used car prices continued to decline, falling 2.9%, and are now down 3.3% annually after increasing substantially earlier in the health crisis. Airfare declined by 3%. Medical care services slid 0.7% as insurance costs eased. And furniture dropped 0.8%.

Read More: Inflation eased again but stayed high in November, CPI report shows

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