Interest Rate Roundup

Friday, December 14, 2007

Yet another ugly inflation surprise

Is it time to get out those "Whip Inflation Now" buttons again? Earlier this week, we learned that overall producer prices are rising at the fastest year-over-year rate since November 1981 (+7.2%) ... and that import prices are increasing at the greatest year-over-year rate in recorded U.S. history (+11.4% -- the data series goes back to 1982). Now, it turns out consumer prices are on the move, too.

The November Consumer Price Index jumped 0.8% in November, more than the 0.6% that economists were looking for. That pushed the YOY rate of consumer inflation to 4.3% from 3.5% a month earlier -- the most since September 2005 (which was impacted by the hurricanes of that year).

The "core" CPI also rose more than expected -- 0.3% against a forecast of 0.2%. That pushed the YOY rate in core inflation to 2.3%; it hasn't been hotter than that since March. Increases were widespread. Housing costs were up 0.4% ... fuels and utilities were up 1.5% ... apparel was up 0.8% ... and medical care was up 0.4%.

Obviously, energy prices were a major factor in last month's gain. But even services inflation, ex-energy, was up 0.3% (or 3.3% YOY) ... and the overall core reading was hotter-than-expected.


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