The U.S. consumer inflation rate increased in November on the back of higher fuel costs and, to a lesser degree, higher “shelter” costs. Consumer price index (CPI) figures released by the Bureau of Labor Statistics indicated consumer prices rose by 0.4% in November, ahead of market expectations of 0.3%. On a 12-month basis the consumer inflation rate rebounded from October’s 2.0% to 2.2%.
Core prices, or prices excluding food and energy, rose by 0.1% over the month and 1.7% for the year. Both these monthly and annual price changes were lower than October’s comparable figures of 0.2% and 1.8%. ANZ senior economist Felicity Emmett said core inflation rose less than the expected 0.2% as prices in a couple of retailing segments lived up to their highly variable nature. “Core US inflation rose slightly less than expected, but this was mainly due to volatile components like airfares and apparel undershooting.”
The ANZ economist does not expect prices to remain contained for long and she expects a turnaround in prices next year. “As margin pressures continue to build and US labour market runs hot some further upward pressure on core inflation seems likely in 2018.”
U.S 2 year bond yields ceased the rising trend of the last few months and dropped by 5bps to 1.77%. 10 year yields also fell and dropped 7bps from 2.41% to 2.34%. The U.S. dollar fell almost 1% against the yen and 0.75% against the euro and pound.