U.S. Consumer Prices Rose 0.4% in November -- Update

By Sarah ChaneyFeaturesDow Jones Newswires

A bump in energy prices boosted U.S. consumer prices in November, but that masked a softening in underlying inflation trends.

The consumer-price index, which measures what Americans pay for everything from breakfast cereal to doctors' visits, increased 0.4% in November from the prior month, the Labor Department said Wednesday. Overall prices climbed 2.2% in November from a year earlier.

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The headline rise was underpinned by a 3.9% increase in the energy prices. Excluding the volatile categories of food and energy, so-called core prices rose a more sluggish 0.1%, a slowdown from the previous month's 0.2% increase. The year-over-year rate for core prices dropped to 1.7%, following a rise to 1.8% in October.

The Federal Reserve targets 2% inflation. Many inflation measures softened earlier this year and haven't yet picked up as top Fed officials were anticipating. However, economists said the pickup could be coming, with the economy expanding at a robust rate and joblessness falling to 17-year lows.

"If another rate increase is announced today as expected, (does the Fed) back off of that pace next year given that inflation, while looking a little bit better on trend, is still below where they want it to be?" said Sarah House, economist at Wells Fargo.

Core prices excluding food and energy were dragged down by a decline in clothing prices, which fell 1.3% in November, the largest decrease in nearly two decades and possibly a result of earlier holiday discounting this season. Shelter prices grew 0.2% from a month earlier, compared with a 0.3% rise in the previous two months.

Physician prices declined 1.8% in the 12 months through November, the biggest drop since record-keeping began in 1947. The trend continued in November, with prices falling 0.8% from a month earlier.

Steve Reed, economist at the Labor Department, said the department has received lower response rates in the physicians' services category over the last several years. Doctors who do respond are more willing to report self-paid prices than private-insurance prices, meaning the data the department collects aren't necessarily representative of the actual prices. That could be skewing these measures.

Certain categories that had shown weakness earlier in the year, including cellphone services and prescription drugs, increased in November. Used vehicle prices increased 1%, lifted by demand to replace hurricane-destroyed vehicles.

The report is the Federal Reserve's last peek at a major inflation gauge before the central bank's two-day policy meeting concludes Wednesday afternoon. Central bank officials are likely to look through the uncertain inflation outlook and raise interest rates by a quarter-percentage point, the fifth such increase since the Fed began raising rates from near zero two years ago.

The consumer-price index tends to run a little bit higher than the Fed's preferred measure of inflation, the personal-consumption index, reflecting different methods for calculating inflation. Both gauges have followed the same pattern.

The price index for personal-consumption expenditures rose 1.6% in October from a year earlier, the Commerce Department earlier said. That annual inflation reading has remained below the Fed's 2% target for the best part of 5 1/2 years.

Persistently low inflation readings could complicate officials' decisions on how quickly to raise interest rates in 2018 and beyond.

Chicago Fed President Charles Evans said in a speech in London last month that price growth has been too lackluster.

"I'm concerned something more persistent is holding down inflation today. Namely, I feel we are facing below-target inflation expectations, " Mr. Evans said.

Write to Sarah Chaney at sarah.chaney@wsj.com

(END) Dow Jones Newswires

December 13, 2017 12:10 ET (17:10 GMT)