Inflation Shows Signs of Cooling as We Head Into 2023
Inflation showed further signs of easing in November, as the personal consumption expenditures (PCE) price index rose just 0.1% on a monthly basis and 5.5% over the last year, the Bureau of Economic Analysis said Friday. The 12-month result for November was the smallest increase since October 2021, and a significant softening from the 6.1% growth rate recorded a month earlier according to the revised data.
The core PCE measure – which strips out food and fuel costs and is closely watched by the Federal Reserve – also declined, falling to 4.7% on an annual basis, down from 5.0% the month before.
Spending by households also showed signs of slowing down in November, the BEA said, coming in flat on a month-over-month basis after adjusting for inflation.
“All in all the data releases painted a picture of a slowing economy heading into the end of the year, which should help support a continued deceleration in inflation as we head into 2023,” Sam Millette, fixed income strategist for Commonwealth Financial Network, said, per Bloomberg.
CNBC’s Ron Insana said the data adds weight to the argument that the Fed has already done enough to bring inflation under control. “Maybe this is a temporary respite from ever-higher prices or just maybe — as some of us have forecast all along — the economy hasn’t been going through a 1970s style inflation spiral,” he wrote Friday. “Instead, it was going through a pandemic and war-related disruption that boosted inflation for a limited time before the economic world edged back toward normal.”
Nevertheless, although inflation is showing signs of cooling, it remains well above the Fed’s 2% target, and most analysts expect the central bank to continue to take a tough stance in its effort to bring inflation under control.