Behind the Numbers: PCE Inflation Update, November 2021

The headline, or all-items, PCE price index rose an annualized 7.6 percent in November after increasing an annualized 8.5 percent in October. The price index for PCE excluding food and energy rose at a 5.7 percent annualized rate after increasing an annualized 5.9 percent a month earlier.

The Dallas Fed’s Trimmed Mean PCE inflation rate was an annualized 4.3 percent in November, compared with a 4.0 percent rate in October.

Over the six months ending in November, the trimmed mean averaged an annualized 3.5 percent rate of increase. Over the same period, the headline and core indexes averaged annualized rates of 6.1 percent and 4.7 percent, respectively.

The 12-month trimmed mean inflation rate was 2.8 percent in November, up from 2.5 percent in October. The 12-month inflation rate for headline PCE was 5.7 percent, up from 5.1 percent in October, while the 12-month inflation rate for PCE excluding food and energy was 4.7 percent, versus 4.2 percent a month earlier.

Gasoline Prices Up Sharply, Poised for Small Decline

The price index for gasoline and other motor fuel rose a seasonally adjusted 6.1 percent in November, matching its increase in October. Prices for the other major energy components also rose, with the electricity and natural gas indexes up 0.3 percent and 0.6 percent, respectively, and the fuel oil index rising 3.5 percent. The price index for energy goods and services as a whole rose 3.6 percent in November after increasing 4.9 percent in October.

The price index for gasoline was up 58.0 percent for the 12 months ending in November; it had been up 49.6 percent for the 12 months ending in October. Compared with November 2020, the price index for fuel oil was up 59.3 percent, while the price indexes for electricity and natural gas were up 6.5 percent and 25.1 percent, respectively. The price index for energy goods and services as a whole was up 34.0 percent over the 12 months.

After November’s 6.1 percent increase, the price index for gasoline is likely to show a small decline when PCE data for December are released. Weekly retail price data from the Department of Energy (DOE) show gasoline prices on track for a roughly 2.1 percent decrease in December before seasonal adjustment. The typical seasonal pattern for December—what we would expect given normal changes in supply-and-demand conditions—amounts to a roughly 1.7 percent price decline, making the DOE data consistent with a 0.4 percent decrease in the seasonally adjusted gasoline price index. A decrease of that magnitude would have a negligible effect on December’s headline inflation rate.

Food Prices Record Another Robust Increase

The price index for food and beverages purchased for off-premises consumption rose at an 8.4 percent annualized rate in November after increasing at a 10.0 percent rate in October. The large jump in the aggregate reflects increases in the prices of both less-processed food items (up an annualized 11.2 percent) and more-processed food items (up an annualized 7.3 percent).

The price index for food as a whole was up 5.6 percent over the 12 months ending in November. The 12-month increase in the aggregate reflects a 9.6 percent rise in the prices of less-processed items and a 4.0 percent increase in the prices of more-processed items.

Prices for Core Goods, Services Rise Sharply

Prices for core goods rose an annualized 5.9 percent in November after increasing an annualized 11.6 percent in October.

Among core goods, the price index for jewelry (down an annualized 29.1 percent) had the largest negative impact, subtracting about 0.2 annualized percentage points from November’s core rate. At the other end of the spectrum, the price index for used light trucks (up an annualized 37.6 percent) had the largest positive impact, contributing about 0.5 annualized percentage points to November’s core rate.

For the 12 months ending in November, prices for core goods were up 6.1 percent, compared with a 5.6 percent increase for the 12 months ending in October.

Prices for core services, meanwhile, rose an annualized 5.6 percent in November after increasing an annualized 3.7 percent in October. Among components experiencing outsized changes, the price index for legal services (down an annualized 10.8 percent) had the biggest negative impact on ex-food-and-energy inflation, subtracting around 0.1 annualized percentage points from November’s core rate. The price index for financial service charges, fees and commissions (up an annualized 26.7 percent) had the largest positive impact among components experiencing outsized changes, contributing about 0.7 annualized percentage points to November’s core rate.

Our “big three” price index—aggregating three of the largest and least-volatile components of core services: rent, owners’ equivalent rent (OER) and the price of dining out—rose at a 6.3 percent annualized rate in November, compared with a 6.7 percent rate in October. Individually, the annualized increases were 5.2 percent for rent, 5.4 percent for OER and 9.1 percent for dining out (more formally, “other purchased meals”).

For the 12 months through November, the big three index was up 4.3 percent, compared with a 3.9 percent increase for the 12 months through October. The price index for core services as a whole rose 4.1 percent for the 12 months ending in November, compared with a 3.6 percent increase for the 12 months through October.