U.S. core CPI slows in November, apparel prices tumble

Gladys Abbott
December 14, 2017

But excluding the more volatile food and fuel categories, PPI rose 0.3 percent, the same increase recorded in the prior two months.

"The pickup over the year will be welcomed by the Fed as an indication that inflation is gradually moving up", said Sarah House, an economist at Wells Fargo Securities.

As a result, the annual increase in the core CPI slowed to 1.7 per cent in November from 1.8 per cent in October.

Producer prices increased 0.4% in November, seasonally adjusted, after growing 0.4% in October, according to the U.S. Bureau of Labor Statistics.

The overall CPI increased 0.4 per cent in November after edging up 0.1 per cent in October. That raised the year-on-year increase in the CPI back to 2.2% from 2% in October. The unemployment rate is at a 17-year low 4.1 per cent.

The Fed made a decision to raise interest rates on Wednesday for the third time this year and expected to hike the rates three more times in 2018.

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"The report is certainly not weak enough to stop the Fed from tightening today, but it could result in the tone of the statement being slightly less hawkish than it would have been with a consensus-like reading", said Jim O'Sullivan, chief US economist at High Frequency Economics in Valhalla, New York.

Prices for final demand services grew 0.2%, the third consecutive rise.

The headline rise was underpinned by a 3.9% increase in the energy prices.

Core prices excluding food and energy were dragged down by a decline in clothing prices, which fell 1.3% in November, the largest decrease in almost two decades and possibly a result of earlier holiday discounting this season. Apparel prices fell 1.3 percent, biggest drop since September 1998.

Economists had forecast the PPI gaining 0.3% last month and accelerating 2.9% from a year ago.

The Department of Labour said Wednesday that November's data means the annual inflation rate hit 2.2 per cent for the 12-month period.

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