U.S. Consumer Prices Flat in November U.S. consumer prices were flat in November, although the broader trend of underlying inflation showed signs of firming, brightening the outlook for Federal Reserve officials as they meet to debate raising short-term interest rates.
The consumer-price index was unchanged in November after rising a seasonally adjusted 0.2% in October, the Labor Department said Tuesday. Excluding the volatile food and energy categories, so-called core prices rose 0.2%, the same pace of growth as in October and September. The reading was in line with economists’ expectations.
Over the year, overall prices rose 0.5%, the largest 12-month increase since December 2014. Core prices were up 2% on the year, the largest 12-month increase since May 2014, driven by rising housing costs. (…)
Paul Ashworth of Capital Economics said core inflation “is almost back to target at a time when the dollar’s surge and the indirect impact of lower commodity prices are probably subtracting 0.5% from the rate.”
The Fed’s preferred inflation gauge, the index of personal consumption expenditures, hasn’t hit the central bank’s 2% target in 3½ years. Core inflation as measured by that gauge rose 1.3% in October from a year earlier, unchanged for 10 months. PCE inflation tends to run about 0.5 percentage point lower a year than the CPI. (…)
Prices of food also weakened 0.1% on the month, amid weakness in agricultural prices this year. Apparel costs dropped 0.3%, although the cost of housing and medical care increased on the month. Shelter prices have risen 3.2% over the year and the cost of services excluding energy services is up 2.9%.
It is true that since 1960 and 1990, total PCE prices were 0.5% below CPI (also true for core PCE prices vs core CPI). Since 2000, however, the gap has averaged 0.3% (0.25% for core prices).
From the Cleveland Fed:
According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.1% annualized rate) in November. The 16% trimmed-mean Consumer Price Index rose 0.1% (1.4% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report.
Core inflation has clearly reached the 2% level in 2015.
From Bespoke Investment:
On the Rule of 20, this latest acceleration in core CPI caps the rising inflation headwind faced throughout 2015 as core CPI rose from +1.5% earlier in the year to 2.0%. This 0.5% increase effectively reduces “fair value” by 2.7% to 2116.
Empire State Factory Sector Activity Improves
The Empire State Factory Index of General Business Conditions improved from its worst level four months ago, although it remained negative. The reading of -4.59 compared to a low of -14.92 in August. The latest figure was near expectations for -6.5 in the Action Economics Forecast Survey. The data are reported by the Federal Reserve of New York and reflect business conditions in New York, northern New Jersey and southern Connecticut.
Based on these figures, Haver Analytics calculates a seasonally adjusted index that is compatible to the ISM series. The adjusted figure improved to 48.0, just above the six-year low.
China’s Central Bank Sees Growth Slowing to 6.8 Percent in 2016
Top researchers at China’s central bank said they expect economic growth to come in at 6.8 percent next year as consumer inflation accelerates and real estate sales rebound.
People’s Bank of China economists also cut their 2015 growth forecast to 6.9 percent from a 7 percent projection in June, according to a working paper by the central bank’s research bureau posted to the website Wednesday. Consumer prices will rise 1.7 percent next year versus 1.5 percent this year, staff led by Ma Jun, chief economist at the PBOC’s research bureau, said in the paper.
The report came hours after a government-backed research institute released a forecast saying growth will slow to between 6.6 percent and 6.8 percent next year.
“We expect that the number of positive factors will gradually increase in 2016,” the central bank researchers wrote in the paper. “These supportive factors include the recovery of real estate sales, the lagged impact of macro and structural policies, as well as some modest improvement in external demand.” (…)
Congressional Leaders Agree to Lift Oil Exports Ban In a move considered unthinkable even a few months ago, congressional leaders have agreed to lift the nation’s 40-year-old ban on oil exports, a move driven by a boom in U.S. oil drilling.
(…) The U.S. is already exporting nearly 400,000 barrels of crude a day to Canada, the biggest exemption under the ban. That is more than nine times as much as in 2008 but still just 3.8% of the U.S. oil produced every day. (…)
The logistics of a new surge of oil exports would be relatively manageable, especially compared to exporting natural gas, which takes years of federal permitting and billions of dollars in technology to liquefy the gas.
Extensive networks of oil pipelines and storage tanks already stretch along the Gulf Coast from Corpus Christi, Texas, to St. James Parish, La. Those oil ports, where nearly a third of U.S. refineries are located, are for now geared toward unloading crude from tankers, not loading them. So initially there would be some constrained capacity that caps energy companies’ ability to ship crude out to foreign buyers.
But retrofitting those facilities—adding more deep-water dock space and equipment to load oil tankers—could happen quickly in a place like Texas, where permitting is easy and such projects face little community opposition. The ports of Corpus Christi and Houston are already undergoing dramatic expansions. (…)