November Consumer Price Index: What to know this week

·Reporter
·7-min read

This week, investors are set to focus on updates on the Omicron variant and inflation. Concerns around both of these factors had stirred up volatility across markets last week.

The two are intertwined. Many have feared that an additional wave of the coronavirus could spur another slowdown in consumer mobility and spending that hits economic activity and corporate earnings. Vaccine-makers and other researchers have yet to determine the extent of Omicron's transmissibility and severity of illness caused by the variant, or whether it is at least partially resistant to current vaccines. 

And yet despite these virus-related fears, monetary policymakers have signaled they are ready to pull back on monetary policy stimulus that had helped support the economy for more than a year-and-a-half during the pandemic. That's come as inflationary trends have proven stickier than previously expected, given tighter monetary policies could help ease elevated prices.

Investors are set to receive an updated look at the state of inflation later this week, with the Labor Department releasing its November Consumer Price Index (CPI) on Friday. Though the Federal Reserve has typically looked to the core personal consumption expenditures (PCE) index as its preferred gauge of inflation, the CPI has served as another critical datapoint underscoring the extent of price increases impacting Main Street consumers.

The November CPI is expected to come in hot yet again. Consensus economists expect the CPI to rise by 0.7% in November month-on-month, compared to October's 0.9% rise. This would mark an 18th straight month of increases in the CPI. 

On a year-over-year basis, the CPI is expected to accelerate to a 6.7% clip, versus October's 6.2% annual rise. This would mark the fastest increase since 1982. 

Excluding more volatile food and energy prices, the CPI will likely have risen by 4.9% over last year, also speeding up from October's 4.6% and representing the fastest increase since 1991. 

Increases in the CPI have been broad-based in recent months, with supply chain constraints and labor shortages hitting a variety of industries and leading many companies to pass on extra costs to their end users. Recent surges in energy and commodity prices have also contributed notably to the headline CPI, with fuel oil prices rising by 12.3% month-on-month in the October CPI, and natural gas rising by 6.6% in its biggest monthly rise since 2014. And used car and truck prices — which had eased in August and September after surging earlier during the reopening amid a pick-up in mobility — also reversed course to jump anew in October. 

"We are in the midst of a third wave of pain, and we're not talking about COVID. One of the big surprises in the October CPI report last month was a 2.5% pop in used car prices, which contributed 10bp [basis points] to the 0.6% mom pop in broader core CPI," Michelle Meyer, Bank of America chief U.S. economist, wrote in a note. "Unfortunately, this may only be the beginning." 

"Outside of autos, we look for price gains across goods categories such as household furnishings, apparel, and recreation commodities," she added. "Supply chains remain constrained by bottlenecks which convinced many retailers to kick off holiday sales even earlier this year in October. Considering the seasonals, that means October prices were likely biased down but November prices should be biased up. Retailers also may have offered fewer discounts compared to previous years given tighter inventories."

LOS ANGELES, CALIFORNIA - NOVEMBER 11: A person shops in the meat section of a grocery store on November 11, 2021 in Los Angeles, California. U.S. consumer prices have increased solidly in the past few months on items such as food, rent, cars and other goods as inflation has risen to a level not seen in 30 years. The consumer-price index rose by 6.2 percent in October compared to one year ago. (Photo by Mario Tama/Getty Images)
LOS ANGELES, CALIFORNIA - NOVEMBER 11: A person shops in the meat section of a grocery store on November 11, 2021 in Los Angeles, California. U.S. consumer prices have increased solidly in the past few months on items such as food, rent, cars and other goods as inflation has risen to a level not seen in 30 years. The consumer-price index rose by 6.2 percent in October compared to one year ago. (Photo by Mario Tama/Getty Images)

For investors, the present elevated levels of inflation have suggested the Federal Reserve may need to move faster than previously expected to raise interest rates and slow these jumps in prices. Members of the Federal Open Market Committee (FOMC) will be in a blackout period this week ahead of their December meeting, during which many market participants expect the central bank will decide to accelerate the pace of the asset-purchase tapering process going forward. 

In November, the Fed had decided to slow its asset-purchase program by about $15 billion per month, after having purchased $120 billion per month in agency mortgage-backed securities and U.S. Treasuries since the height of the pandemic last year.

Last week, Federal Reserve Chair Jerome Powell said the central bank could "wrap up [its] purchases a few months early" given he has observed "an economy that is very strong and inflationary pressures that are very high." He also said it was likely a "good time to retire" the use of the word "transitory" to describe inflation. And other Fed officials have also suggested they would support accelerating the tapering process against the backdrop of the firming economic recovery and rising prices. 

"The Fed only announced the start of its QE [quantitative easing] taper at the FOMC meeting a month ago and, while it tweaked the language a little, November’s statement still insisted that high inflation was expected to be largely transitory. Admittedly, since that last policy meeting, we learned that core inflation increased by more than expected in October and job growth was solid," Paul Ashworth, chief North America economist, wrote in a note Friday. "It is not obvious that price pressures have increased markedly in the past few weeks. This shift in tone is more about Fed officials finally accepting what we thought was obvious six months ago."

Economic calendar

  • Monday: No notable reports scheduled for release

  • Tuesday: Non-farm productivity, 3Q final (-4.9% expected, -5.0% in 2Q); Unit labor costs, 3Q final (8.3% expected, 8.3% in 2Q); Trade balance, October (-$66.9 billion expected , -$80.9 billion in September); Consumer credit, October ($25.000 billion expected, $29.913 billion in September)

  • Wednesday: MBA Mortgage applications, week ended Dec. 3 (-7.2% during prior week); JOLTS Job openings, October (10.500 million expected, 10.438 million in September)

  • Thursday: Initial jobless claims, week ended Dec. 4 (225,000 expected, 222,000 during prior week); Continuing claims, week ended Nov. 27 (1.910 million expected, 1.956 million during prior week); Wholesale inventories month-over-month,October final (2.2% expected, 2.2% in September); Household change in net worth, 3Q ($5.849 billion in 2Q)

  • Friday: Consumer Price Index, month-over-month, November (0.7% expected, 0.9% in October); CPI excluding food and energy, month-over-month, November (0.5% expected, 0.6% in October); CPI year-over-year, November (6.7% expected, 6.2% in October); CPI excluding food and energy, year-over-year, November (4.9% expected, 4.6% in October); Real Average Weekly Earnings, year-over-year, November (-1.6% in October); University of Michigan sentiment, December preliminary (68.0 expected, 67.4 in November); Monthly budget statement, November (-$195.0 billion expected, -165.1 billion in October)

Earnings calendar 

  • Monday: Coupa Software (COUP), MongoDB (MDB), Gitlab (GTLB) after market close

  • Tuesday: AutoZone (AZO) before market open; ChargePoint Holdings (CHPT), StitchFix (SFIX) after market close 

  • Wednesday: GameStop (GME), Rent the Runway (RENT), RH (RH) after market close 

  • Thursday: Broadcom (AVGO), Chewy (CHWY), Oracle (ORCL), Costco (COST) after market close 

  • Friday: No notable reports schedule for release

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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