US inflation decline stalls

The data

US consumer prices rose by 0.3% in November from the previous month. The year-on-year rate rose from 2.6% to 2.7%. The more important core rate, which excludes the volatile prices of energy and food, was 0.3% month-on-month. The year-on-year core rate remained at 3.3%. This was in line with consensus expectations but slightly above our forecast.

... and the background

The decline in US inflation has stalled. This applies particularly to the core rate, i.e. the inflation rate excluding volatile energy and food prices, which provides a better indication of the trend. Here, the month-on-month rate was 0.3% for the fourth month in a row. In annualized terms, this corresponds to around 31/2% and is far too high given the Fed's inflation target.

In contrast to the previous months, the price pressure in November resulted primarily from a price increases in goods, especially for new and used cars. It is possible that this is an outlier. By contrast, the upward pressure on prices for services has somewhat subsided. This applies above all to the important rents, which have risen much more slowly than before.

In the last three months, consumer prices excluding energy and food rose by 3.7% on an annualized basis, which means that momentum continued to pick up. While there have been several such phases in the past, they were only temporary and the downtrend in the year-on-year rate therefore resumed sooner or later. So today's data do not have to mean the end of the downward trend in inflation, especially since, as mentioned above, price pressure is tending to ease in the important services sector, and in particular in rents. However, it remains to be seen whether the situation eases again this time. In any case, the figures support our view that US inflation will not fall to the central bank's target of 2% on a lasting basis.

For full text see attached PDF-Version.