US consumer prices likely posted largest annual increase in 1-1/2 years in November

By Lucia Mutikani

WASHINGTON, Dec 18 (Reuters) – Economists have predicted that U.S. consumer prices will likely rise by the most in 1-1/2 years through November; This will underscore the worsening affordability challenges facing Americans, who are blamed in part for tariffs on imports.

The Labor Department’s Bureau of Labor Statistics will not release month-to-month changes when it releases its delayed Consumer Price Index report for November on Tuesday, after a 43-day government shutdown prevented the collection of October data. The October CPI announcement was canceled due to the inability to collect price data retrospectively.

The longest lockdown in history also affected labor market data; For the first time, the government did not publish the unemployment rate for October.

However, the BLS will publish annual rates of the CPI and the core CPI, which excludes variable food and energy components.

The agency publishes numerous indices in addition to the broad CPI and core CPI. Those derived from data that did not need to be physically collected will be available, but the BLS said it expects “the number of publishable indices will be small.”

The statistics agency said it was “unable to provide specific guidance to data users on navigating missing October observations.” Economists recommended examining the CPI and its components on an annual basis or bi-monthly change.

“Downward inflation progress has stalled,” said Andy Schneider, senior U.S. economist at BNP Paribas. “This largely reflects companies in goods-producing sectors passing on tariff costs into prices.”

CPI likely rose 3.1% year-on-year in November, according to a Reuters survey of economists; this would be the largest increase since May 2024. CPI increased by 3.0% in the 12 months to September.

However, CPI was below expectations due to data collection being postponed towards the end of the month when retailers offered holiday season discounts. This can be clearly seen in the low prices of goods such as furniture and entertainment products.

“This year’s November CPI may capture a period that reflects holiday season discounts more heavily than a normal November, which would reflect average prices for the entire month,” said Citigroup economist Veronica Clark. “If there is abnormal weakness in commodity prices in November, there may be a greater rebound in these components in December.”

President Donald Trump’s sweeping import tariffs have raised prices on many goods, but the transfer of tariffs has been gradual as businesses work through inventories accumulated before the tightening of trade policy and also absorb some of the duties, evident in modest increases in new motor vehicle prices.

TARIFFS HARM THE CONSUMERS

“Retailers are in the midst of imposing tariffs on consumers and have passed on about 40% of the total through September,” said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. “We expect this rate to gradually increase to 70% by March and then stabilize.”

Economists say the tariff burden has fallen disproportionately on low-income households, which have little or no savings buffer and also experience slower wage growth than other workers.

Trump, who won the 2024 presidential election on promises to tame inflation, has oscillated in recent weeks between dismissing affordability issues as a hoax, blaming former President Joe Biden and promising Americans will benefit from his economic policies next year.

Core CPI is expected to increase by 3.0% on an annual basis in November. This would match September’s gain and reflect higher prices for rent and goods, excluding food and energy. Lower airfares and hotel and motel rooms can provide a balance.

The Federal Reserve tracks Personal Consumption Expenditures Price indices for a 2% inflation target.

PCE price measurements are calculated from some components of the CPI and Producer Price Index baskets. October PPI report was cancelled. The November producer inflation report will now be announced in mid-January. The government has not yet set a new release date for November PCE price data. Both PCE price metrics were well above target in September.

Fed officials last week cut the U.S. central bank’s benchmark overnight interest rate by another 25 basis points to a range of 3.50% to 3.75%, but signaled that borrowing costs are not expected to fall further in the near term as they await clarity on the employment market and the direction of inflation.

“Tariffs are responsible for most of the inflation overruns,” Fed Chairman Jerome Powell told reporters.

It may be some time before consumers see lower prices as the White House rolls back tariffs on some goods like beef, bananas and coffee.

“We see the potential for a new burst of goods inflation in the first quarter, with companies tending to reconsider pricing decisions at the beginning of the calendar year,” said Sara House, senior economist at Wells Fargo.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)