Behind the Numbers: PCE Inflation Update, November 2022
The headline, or all-items, PCE price index rose an annualized 1.3 percent in November after increasing an annualized 4.6 percent in October. The price index for PCE excluding food and energy rose at a 2.0 percent annualized rate after increasing an annualized 3.2 percent a month earlier. Energy prices were down for the month, led by a drop in the price index for gasoline and other motor fuel. Food prices rose.
The Dallas Fed’s Trimmed Mean PCE inflation rate was an annualized 3.4 percent in November, compared with a 3.9 percent rate in October.
Over the six months ending in November, the trimmed mean averaged an annualized 4.7 percent rate of increase. Over the same period, the headline and core indexes averaged annualized rates of 4.0 percent and 4.4 percent, respectively.
The 12-month trimmed mean inflation rate was 4.6 percent in November, down from 4.7 percent in October. The 12-month inflation rate for headline PCE was 5.5 percent, down from 6.1 percent in October, while the 12-month inflation rate for PCE excluding food and energy was 4.7 percent versus 5.0 percent a month earlier.
The price index for gasoline and other motor fuel fell a seasonally adjusted 2.1 percent in November after increasing 4.0 percent in October. Prices for the other major energy components were mixed, with the price index for fuel oil up 1.7 percent and the price indexes for electricity and natural gas services down 0.2 percent and 3.5 percent, respectively. The price index for energy goods and services as a whole fell 1.5 percent in November after increasing 2.5 percent in October.
The price index for gasoline was up 10.8 percent for the 12 months ending in November; it had been up 18.1 percent for the 12 months ending in October. Compared with November 2021, the price index for fuel oil was up 65.7 percent, while the price indexes for electricity and natural gas were up 13.7 percent and 15.5 percent, respectively. The price index for energy goods and services as a whole was up 13.6 percent over the 12 months.
After November’s 2.1 percent decrease, the price index for gasoline is likely to show an even larger 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 12.6 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 3.4 percent decline, making the DOE data consistent with a 9.2 percent decrease in the seasonally adjusted gasoline price index. A decrease of that size would subtract about 2.7 annualized percentage points from December’s headline inflation rate.
The price index for food and beverages purchased for off-premises consumption rose at a 4.2 percent annualized rate in November after increasing at a 5.5 percent rate in October. The increase in the aggregate reflects similar-sized increases in the prices of both less-processed food items (up an annualized 4.3 percent) and more-processed items (up an annualized 4.2 percent).
The price index for food as a whole was up 11.2 percent over the 12 months ending in November. The 12-month increase in the aggregate reflects a 7.8 percent rise in the prices of less-processed items and a 12.6 percent increase in the prices of more-processed items.
Prices for core goods fell an annualized 5.1 percent in November after decreasing an annualized 2.9 percent in October. The core goods price index last registered back-to-back monthly declines in September and October of 2020.
Among core goods, the price index for used light trucks (down an annualized 30.2 percent) had the largest negative impact, subtracting about 0.5 annualized percentage points from November’s core rate. At the other end of the spectrum, the price index for motor vehicle accessories and parts (up an annualized 23.9 percent) had the largest positive impact, contributing about 0.1 annualized percentage points to November’s core rate.
For the 12 months ending in November, prices for core goods were up 3.8 percent, compared with 4.6 percent for the 12 months ending in October.
Prices for core services, meanwhile, rose an annualized 4.8 percent in November after increasing an annualized 5.6 percent in October. Among components experiencing outsized changes, the price index for air transportation (down an annualized 59.2 percent) had the biggest negative impact on ex-food-and-energy inflation, subtracting around 1.0 annualized percentage points from November’s core rate. The price index for owner-occupied stationary homes (up an annualized 8.4 percent) had the largest positive impact, contributing about 1.0 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 an 8.1 percent annualized rate in November, compared with an 8.8 percent rate in October. Individually, the annualized increases were 9.6 percent for rent, 8.4 percent for OER and 6.3 percent for dining out (more formally, “other purchased meals”).
For the 12 months through November, the big three index was up 7.5 percent, compared with a 7.3 percent increase for the 12 months through October. The price index for core services as a whole rose 5.0 percent for the 12 months ending in November, compared with a 5.2 percent increase for the 12 months through October.