The U.S. Bureau of Labor Statistics (BLS) released its November Inflation report on December 11th, 2019, for the 12 months through the end of November 2019.
November Inflation is Up
- Annual inflation in November was 2.05% up from October’s 1.76%. The last time inflation was this high was in April.
- Inflation has been in a narrow range through much of 2019. 1.79% in May, 1.81% in July, 1.65% in June, with a high of 2.00% in April.
- Inflation peaked at 2.95% in July 2018.
- The CPI-U index in November was 257.208 down from 257.346
- Monthly Inflation for November was -0.05% much higher than -0.33% in November 2018.
- Next release January 14th
The CPI index itself actually decreased this month (i.e. prices were actually lower this month than last month). October’s CPI Index was 257.346 while November decreased slightly to 257.208 but the Annual inflation rate actually went up. How can this be?
Annual inflation for the 12 months ending in October was 1.76% while the 12 months ending in November was 2.05% i.e. an increase of 0.29%. The key lies in the individual monthly components. Last month the 12 months included November 2018 where there was a monthly decrease of -0.33% so that month alone wiped out a bunch of the previous inflation. But this November it was only -0.05% so although it was still negative it was much less negative. Thus the ANNUAL inflation rate actually went up.
According to the BLS commissioner’s report, “The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.3 percent in November on a seasonally adjusted basis, after rising 0.4 percent in October, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.1 percent before seasonal adjustment. Increases in the shelter and energy indexes were major factors in the seasonally adjusted monthly increase of the all items index. Increases in the indexes for medical care, for recreation, and for food also contributed to the overall increase. The gasoline index rose 1.1 percent in November and the other major energy component indexes also increased. The food index rose 0.1 percent, with the indexes for both food at home and food away from home increasing over the month.”
Read the full commentary here.
Seasonally Adjusted Inflation Table
From the November 2019 column in the table above we can see that on a monthly seasonally adjusted basis, Gasoline was up 1.1% compared to 3.7% in October, after being down -2.4% in September. On a Non-adjusted annual basis, however, gasoline was still down -1.2% over the year and fuel oil was down -6.7%. On an annual basis, Food away from home was up 3.2%, shelter was also up 3.3%, Used cars and trucks were down -0.4% and Medical care services were up 5.1%.
Current Inflation Chart
As we can see from the chart below, throughout 2019 the inflation rate has stayed within a fairly narrow range peaking at 2.0% in April and bottoming at 1.52% in February. But this month inflation ticked up above 2% at 2.05%. It also crossed above its 12-month moving average.
Federal Reserve Actions
Since the beginning of 2018 the Federal Reserve (FED) has followed a policy of Quantitative Tightening (QT) i.e. they have reduced the amount of “debt” they held. This debt was acquired during the 3 phases of quantitative easing they employed in an effort to add liquidity to the market to combat the 2008 crash. From the chart, we can see that through QT they began eliminating some of the debt they held. But over the last two months, we can see an uptick indicating that they have once again begun accumulating debt again rather than eliminating it. Thus creating inflationary pressures.
- Quantitative Tightening (QT) has ended and loosening seems to be the new modus operandi.
- What is Quantitative Tightening?
Usually, changes in the FED policy take time to work their way into the economy. But this time the increase in the FED assets seems to have translated into immediate higher inflation. Of course, it could simply be a coincidence. We will see as get into the typically higher inflation first quarter of next year.
In the following chart, we can get a closer look at FED asset creation.
We can see that after declining slightly in August, September was up sharply, October was up moderately and November had a dip in the middle but then finished the month higher.
FED Funds Rate
Another indicator of the shift from tight money to easy money is the reduction in the Fed Funds Rate i.e. the rate the FED charges member banks. The FED drastically reduced interest rates in August falling from 2.40% in July to 2.13% in August. It further reduced rates in September to 2.04%, October was 1.83% and November was down to 1.55%.
See our Moore Inflation Predictor to see our current projections.
Not Seasonally Adjusted Monthly Inflation Rates
See: Monthly Inflation Rate for more information and a complete table of Unadjusted Monthly Rates.
The misery index as of December 2019 (based on the most recent official government inflation and unemployment data for the 12 months ending in November) is at 5.55%. up slightly from 5.36% in October and September’s 5.21%. It was 5.45% in August and 5.51% in July. It has only been this low a few times since data became available in 1948. Surprisingly, one of those times was in September of 2015 when the Misery Index briefly neared 5%. Before that, we had 2006, 1998 and 1965 which were considerably higher at 5.71%, 5.74%, and 5.70% respectively. May of 1959 was 5.45% so you have to go all the way back to 1955 to see a Misery index below 5%.
NYSE Rate of Change (ROC)©
The market has reached a milestone of doubling since the September 2011 low. It is up 1.18% since last month after increasing 5.49% the month before.
In September the NYSE index was down -2.99% on a monthly basis but in October it gained a whopping 5.49% totally wiping out the previous month’s loss and tacking on a nice gain as well. In November it tacked on another 1.18%. On an annual basis, the NYSE is up 14.2%! Of course, we have to remember that last year the NYSE index had a terrible 4th quarter. It fell -4.93% in October, -0.17% in November, -3.79% in December and -0.18% in January.
See the NYSE ROC for more info.
NASDAQ Rate of Change (ROC)©
Buy Signal! Last month the NASDAQ ROC shot up from a negative -3.26 monthly return in October to a massive 7.37% return in November. This month tacked on another 1.53% resulting in a 22.53% annual return in the NASDAQ. Of course, this is measuring from the dip in 2018. The NASDAQ is up a whopping 235% since the September 2011 low while the NYSE is “only” up 100%.
See NASDAQ ROC for more.
Regional Inflation Information
The U.S. Bureau of Labor Statistics also produces regional data. So if you are interested in more localized inflation information you can find it here.
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