Inflation Eased Last Month–What That Means for Your Wallet
By: James Flippin · December 14, 2022 · Reading Time: 3 minutes
The latest inflation data is providing the stock market and consumers alike with some cause for cautious optimism. In November, the consumer price index came in cooler than expected, having risen 7.1% on an annual basis. That’s below analysts’ prediction of 7.3%, as well as the 7.7% year-over-year increase observed in October.
A key measure of inflation, the CPI measures price growth across a basket of goods. November’s 12-month increase is the smallest since December 2021. Analysts say this corresponds to price moderation across a broad variety of goods, rather than just a few outliers. It would seem the Federal Reserve’s rate-hike campaign and related measures are helping slow inflation.
Despite the general trend, some routine purchases did increase in price last month, from October. These include groceries, communication costs, and apparel. But energy prices, used cars, and airfares all declined on a monthly basis.
Economists have keyed in on food and energy prices in particular, as each category has fallen from highs observed earlier this year. Still, on an annual basis, consumers are paying significantly more for key items compared to this time last year. Airfares are up 36%, while fuel oil is up 66%, butter is up 34%, and flour is up 25%.
Housing is another major non-discretionary expense contributing to the overall inflation rate, with the shelter index up 7.1% year-over-year. This will likely take some time to moderate, as asking rents and home prices typically lag behind the broader CPI.
A New Normal?
Economists maintain the current economy is more prone to inflation, largely due to the increased cost of labor.
There’s also the risk that climate change will continue to disrupt the supply chain at an outsized rate, which makes goods more scarce, raising prices. Between the potential for extreme weather events and the ongoing difficulty hiring workers, inflation may prove a persistent problem for years to come.
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