Inflation Jumps by 0.8 Percent in November

December 14, 2007 (Prices Byte)

Inflation Jumps by 0.8 Percent in November

Prices Byte by Dean Baker

For Immediate Release: December 14, 2007
Contact: Alan Barber, (202) 293-5380 x115

The overall CPI rose by 0.8 percent in November, the largest increase in more than two years. The biggest factor behind the rise was a 5.7 percent jump in energy prices. However, even the core index rose by 0.3 percent, the largest increase since a 0.3 percent rise in January. The core index has now risen at a 2.6 percent annual rate over the last three months, up from a 2.3 percent rate over the last year. The overall CPI has risen at a 5.6 percent annual rate over the last three months, up from a 4.3 percent rate over the last year.

While the rise in energy prices will not be repeated in the months ahead, and may even be partially reversed, this release, along with the data in the producer and import and export price indexes, suggest that inflation is on an upward path. The acceleration of the core rate of inflation is not driven by anomalies. In addition, food prices also appear to be rising more rapidly on a sustained basis, a development that is consistent with increased export demand, as well as increased demand for biofuels.

The only notable anomaly on the high side in the November data was a 0.8 percent rise in apparel prices. With most import prices now rising, apparel prices may be on a flat or slightly upward path, but this rate of increase clearly will not be sustained. The spurt in apparel prices was offset by anomalies on the low side, most notably a drop of 0.5 percent in the communication component (it has been almost flat over the last year) and a 0.2 percent drop in the lodging away from home index.