As of November 2023, inflation remains a pressing concern for consumers and economists alike. Understanding inflation dynamics requires a nuanced examination of crucial economic indicators published by the Bureau of Labor Statistics and the Bureau of Economic Analysis. The Federal Reserve also uses this data to determine interest rate changes and policy. 

Consumer Price Index (CPI) & Core Inflation Rate

The CPI data is a widely followed measure of inflation that tracks the average change in prices paid by urban consumers for a basket of household consumer goods and services. As of November 2023, the CPI has slowdown to 3.1%, down from 3.7% in September 2023. The Core CPI, which does not include food & energy costs, sits at 4.0% year-over-year. 

Producer Price Index (PPI) – Inflation Measure for Manufactures

This vital measurement tracks the average price change domestic producers receive for their goods and services. It is a leading indicator of consumer inflation, reflecting price pressures that may eventually pass on to consumers. As of November, the PPI is unchanged after falling 0.5% in October, the biggest monthly decline since April 2020. This may further indicate that the inflation surge may be over. Core PPI, which is less food and energy, also remains unchanged. 

Personal Consumption Expenditures (Core PCE)

The PCE price index, also known as consumer spending, is measured by the Bureau of Economic Analysis.  It is another closely watched inflation gauge, excluding volatile food and energy prices. It is considered a preferred measure of inflation by the Federal Reserve as it provides a cleaner signal of underlying inflation trends. As of November, the CPE is down to 3.0% compared to 3.4% a month ago, and a further drop from its peak of 6.9% in June 2022.

Oil & Gasoline Prices

Gas prices dropped 6.77%. The United States average price of regular fell 23 cents nationwide.  Brent oil is down to $81.35, compared to $89.08 in October and $95.86 in September. 

What does this mean for Price Inflation?

The combined numbers may provide complementary insights into what future inflation expectations may be. While the CPI reflects the headline inflation experience of consumers, the CPE excludes volatile components and offers a clearer picture of underlying inflation trends. Conversely, the PPI provides an early indication of price pressures that may eventually translate into higher consumer prices. 

We have likely seen the end of significant price increases. The current picture indicates that the overall consumer price inflation has fallen after reaching an all-time high in recent years. While we are still not at the Federal Reserve’s target of 2%, this may indicate the end of interest increases set by the Fed. Moreover, while the growth rate has slowed, it does not mean prices will fall.