U.S. CPI Fell By A Record 1.7%

The consumer price index (CPI-U) fell by a record 1.7% during November versus October, according to the Bureau of Labor Statistics. Indeed, the decline was the greatest in the series' history which dates back to 1947. The latest fall nearly doubled the October drop of 1.0% and it compared to Consensus expectations for a 1.3% decline. The latest reading lowered the three-month rate of change to -10.2% (AR).

There has been an about-face in fuels' prices since earlier this year and lower energy prices account for most of the recent decline in the total CPI. After rising sharply through July, they've fallen each month by a total of 27.9%. In November alone, energy prices fell 17.0% from October and the drop was led by a record 29.5% fall in gasoline prices (-29.5% y/y) to an average of $2.15 per gallon. Gas prices have moved even lower this month to $1.66. Fuel oil prices fell 13.6% (-3.4% y/y) for the fourth consecutive monthly drop and prices for natural gas & electricity fell 1.0% m/m (+8.1% y/y).

Last month, food & beverage prices continued to buck that downtrend with a 0.2% increase. Perhaps the good news is that the gain was the weakest since February and the running 3-month rate of increase fell to 4.1%, down from a high of 9.1% this past August. Nevertheless, the three-month rate of increase in prices of cereals & bakery products was 7.8% versus a recent high of 19.5% and prices of meats, poultry & fish rose at a 3.5% rate versus the high of 10.9%.

Recent weakness in consumer prices has been reinforced by a decline in core pricing power. The CPI less food & energy was unchanged last month versus Consensus expectations for a 0.1% uptick. The three-month annual rate of increase fell to 1.1% from its July high of 3.5%.

Core goods prices, down 0.2%, fell for the third straight month and the three-month rate of decline amounted to 2.9% which was the weakest since late-2003. The latest decline was led again by lower prices for new & used motor vehicles which were down another 0.9% (-3.1% y/y). Apparel prices ticked up 0.3% (0.0% y/y) after their sharp 1.0% October decline. Prices for household furnishings & operations reflected the weakness in the housing sector and fell 0.2% (+1.8% y/y). Tobacco prices were unchanged for the second month in the last three but they still rose 6.7% y/y.

Core services prices ticked up 0.1%. The three-month growth rate of 2.1% matched the lowest since 2005 which was the least since 2001. Medical care services prices rose just 0.1% (3.1% y/y) but education costs remained firm. They increased 0.4% for the third straight month (5.7% y/y). Shelter prices rose 0.2% (2.1% y/y). As the housing market remained deeply depressed the y/y increase was miniscule. Owners equivalent rent of primary residence, a measure not equivalent to other house price measures, rose 0.3% (2.3% y/y) while rents rose 0.3% (3.6% y/y). Public transportation prices fell for the third consecutive month and the 4.1% year-to-year rate of increase was down from 15.2% this past August. Recreation prices were unchanged (2.0% y/y).

The chained CPI, which adjusts for shifts in consumption patterns, fell 2.0%. Less food and energy, chained prices fell 0.3%.