Inflation Remains Sticky, Rises by 2.7% in November

The final steps to the Fed’s long-term target of 2% annual inflation is proving tricky, with the Consumer Price Index (CPI) rising by 2.7% annually in November.

The CPI increased 0.3% on a seasonally adjusted annual basis in November after rising by 0.2% in each of the previous four months, according to the U.S. Bureau of Labor Statistics (BLS). The CPI has posted below 3% growth on an annual basis since June.

Excluding food and energy components, the core CPI increased by 3.3% over the past 12 months, the same increase as the previous two months.

The index for shelter rose 0.3% in November, accounting for nearly 40% of the monthly increase in inflation. On a year-over-year basis, the shelter index increased 4.7%, the smallest 12-month increase since February 2022.

Other top contributors to the rise in annual inflation in November include the indexes for used cars and trucks (+2%), household furnishings and operations (+0.6%), medical care (+0.3%), and new vehicles (+0.6%).

According to an NAHB analysis of the inflation report, both indexes for owners’ equivalent rent and rent of primary residence increased by 0.2% over the month in November. For the rent index, it was the smallest monthly increase since April 2021 and July 2021.

NAHB constructs a “real” rent index each month to indicate whether inflation in rents is faster or slower than overall inflation. In November, the association’s “real” rent index fell by 0.1%, marking its first negative reading since December 2021. A negative read on the index indicates inflation in rents is rising slower than overall inflation.