by Doug Short and Steven Hansen

The Consumer Price Index (CPI-U) year-over-year inflation rate which remained constant at 1.7% for the previous 3 months dropped to 1.3%. Energy prices decreased whilst food increased partially countering energy's decline. The year-over-year core inflation rate declined 0.1% to 1.7%, and remains under the targets set by the Federal Reserve.

The market expected:

month over month change  Consensus Range Consensus  Actual  CPI-U  -0.3 % to 0.1 % -0.1%  -0.3%  CPI-U less food and energy 0.1 % to 0.2 % +0.1%   +0.1%

Unadjusted CPI-U – Year-over-Year Change (blue line, left axis) and Month-over-Month Change (red line, right axis)

As a generalization – inflation accelerates as the economy heats up, while inflation rate falling could be an indicator that the economy is cooling. However, inflation does not correlate well to the economy – and cannot be used as a economic indicator.

Energy and Shelter was the major influences on this month's CPI.

The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.3 percent in November on a seasonally adjusted basis, the u.s. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.3 percent before seasonal adjustment.

The gasoline index posted its sharpest decline since December 2008 and was the main cause of the decrease in the seasonally adjusted all items index. The indexes for fuel oil and natural gas also declined, and the energy index fell 3.8 percent. The food index rose 0.2 percent with major grocery store food groups mixed.

The index for all items less food and energy increased 0.1 percent in November. The shelter index rose 0.3 percent, and the indexes for medical care, airline fares, and alcoholic beverages also rose. In contrast, the indexes for apparel, used cars and trucks, recreation, household furnishings and operations, personal care, and new vehicles all declined in November. The all items index increased 1.3 percent over the last 12 months, a notable decline from the 1.7 percent figure from the 12 months ending October. The index for all items less food and energy has increased 1.7 percent over the last 12 months, compared to 1.8 percent for the 12 months ending October. The food index has risen 3.2 percent over the span. However, the energy index has declined 4.8 percent over the past 12 months, with the gasoline and fuel oil indexes both falling over 10 percent.