The November CPI will be the first price report since September, as the shutdown forced the Bureau of Labor Statistics (BLS) to miss a CPI release for the first time in many decades. The release will effectively be giving two months’ worth of data. While BLS is unable to know exactly how much prices changed in October, by giving price levels for November, the release will be letting us know how much prices have increased over this two-month period.

The overall CPI increased 0.3 percent in September, while the core increased 0.2 percent. Over the prior year, both increased 3.0 percent. In the intervening two months, we have seen a minor decline in gas prices, which will likely show up as an increase with the seasonal adjustment. Food prices rose rapidly at the wholesale level in September, putting the year-over-year increase at 4.0 percent, considerably above the 2.7 percent year-over-year rise for the food component in the CPI. At least some of the September jump in food prices at the wholesale level will likely show up in the November CPI.  

As a result, the overall index is likely to rise by 0.6-0.7 percent over the two-month period, with the core index slowing to 0.5 percent, due to slower increases in the rent indexes. That should leave the year-over-year increase in the overall index at 3.1 percent, while the inflation rate in the core index will slow to 2.9 percent.

Food Inflation Remains High

The September jump in the Producer Price Index for food was driven by extraordinary jumps in prices for beef and turkey. The latter was driven by a new outbreak of Avian flu. These will be showing up at the retail level, although many stores apparently sold turkey as a Thanksgiving loss leader, which may limit the rise in the CPI.

The prices of other food items have been rising in part from disruptions created by the Trump administration’s deportation efforts. This has resulted in the loss of a large portion of the farm labor force in many areas, as well as workers in the food processing industry. Tariffs have also increased the price of many items, notably coffee, whose price was up 18.9 percent year-over-year in the September CPI. The recent reduction in tariffs will help lower inflation but came too late to have any impact on the November CPI.

Rental Inflation Continues to Slow

Both rent indexes showed lower inflation in September, with the rent proper index rising 0.2 percent, while the owners’ equivalent rent (OER) index rose just 0.1 percent. The 3.4 percent year-over-year inflation rate in the rent proper index is back to its pre-pandemic pace. At 3.8 percent, the OER is still 0.5 percentage points above the pre-pandemic pace.

With private indexes of marketed units showing flat or even declining rents, and the BLS new tenants’ index also showing falling rents, the inflation shown in the CPI indexes will continue to fall. The increase in the indexes over the two-month period will be between 0.4-0.5 percent. This will leave the year-over-year rate in the rent proper index unchanged at 3.4 percent, while bringing down the inflation rate in the OER index to 3.6 percent.   

Energy Prices Will Rise Driven by Electricity and Gas

As noted, gas prices will rise somewhat due to seasonal adjustments. There has been a modest — but widely touted — drop in gas prices in the last month, but this will likely end up as a small increase with the seasonal adjustment, since gas prices always drop in the fall. Electricity prices will likely show a large increase in the November data. The index fell 0.5 percent in September but was up 5.1 percent year-over-year. The September decline was likely an anomaly that will be more than reversed in the data for October and November.

The Effect of Tariffs Will Show up Again in Core Goods

Many retailers have been hesitant to pass on tariff costs, likely hoping that the tariffs will not stick. While the future course of tariffs is still somewhat up for grabs depending on the Supreme Court’s decision, it doesn’t look as though the Trump administration will be backing down from current tax rates. Even if the Court rules against the current tariffs, Trump has indicated that he will look to reinstate them under different legal provisions.

The prices of a number of items, such as cars, appliances, and apparel, have risen far more in the Producer Price Index than the CPI over the last year. Inflation in these items had been close to zero in 2024. There are likely to be further increases in prices for these items in the November CPI release and in subsequent reports.

Medical Service Index Will Show a Two-Month Increase in the 0.6-0.7 Percent Range

After being well-contained through most of the pandemic recovery, inflation in medical services is again substantially outpacing the overall CPI. The index rose 0.3 percent in September and was up 3.9 percent year-over-year. Inflation in the hospital and related services component has been especially fast, rising 0.8 percent in September and 5.8 percent year over year.

Car Insurance Index Likely to Show a Big Rise

Car insurance has been an important factor in inflation in recent years. It has a 3.1 percent weight in the overall CPI and 3.9 percent in the core index. It rose at double digit rates in 2023 and 2024, adding close to 0.5 percentage points to the CPI at its peak inflation in early 2024. Inflation in the index has moderated in recent months, falling 0.4 percent in September and rising just 3.1 percent over the prior year. This moderation is not likely to continue, as underlying factors — such as more expensive cars and repairs, and increased climate-related damage — have not gone away. There will likely be an increase of at least 0.5 percent in the November data.

Overall Picture: Inflation Is Higher Than Fed Target and Accelerating Modestly

The November data are likely to show an inflation rate that is slightly above 3.0 percent, which is more than a full percentage point higher than the Fed’s target. This is mostly due to the tariffs, but that means it is a one-time effect. If the tariffs are not continually raised, inflation should again moderate, although it may be some time before it falls back to the Fed’s 2.0 percent target.