US consumer prices likely posted largest annual increase in 1-1/2 years in November

Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer prices rose at their fastest pace in 1-1/2 years in the year to November, economists predict, underscoring the worsening affordability challenges faced by Americans in part due to import tariffs.

The U.S. Department of Labor’s Bureau of Labor Statistics will not release monthly changes when it releases a delayed report on the consumer price index for November on Tuesday because the 43-day government shutdown has prevented October data from being collected. The October CPI release was canceled due to the inability to collect price data retroactively.

The longest shutdown in history has also affected labor market data, with the government failing to publish the unemployment rate for October for the first time.

But the Bureau of Labor Statistics will publish year-over-year rates for the consumer price index and the so-called core consumer price index, which excludes the more volatile food and energy components.

The agency publishes a number of indices in addition to the broad CPI and core CPI. Those derived from data that do not require physical collection will also be available, although the BLS said it expects “a small number of indexes to be published.”

The statistics agency said it was “unable to provide specific guidance to data users regarding the missing October observations”. Economists recommend looking at year-over-year or two-month changes in the consumer price index and its components.

“The downward trajectory of inflation has stalled,” said Andy Schneider, senior U.S. economist at BNP Paribas. “This largely reflects companies in goods-producing industries passing on the cost of tariffs to prices.”

A Reuters survey of economists estimated that CPI could rise 3.1% year-on-year in November, which would be the largest increase since May 2024. CPI rose 3.0% in the 12 months to September.

But CPI may come in lower than expected as data collection is delayed until the end of the month and retailers offer holiday season discounts. This can be seen in falling prices for items such as furniture and entertainment supplies.

“This November’s consumer price index is likely to be more reflective of holiday season discounts than previous Novembers, and thus reflect average prices throughout the month,” said Veronica Clark, an economist at Citigroup. “If commodity prices are unusually weak in November, then those components could see a sharper rebound in December.”

President Donald Trump’s sweeping import tariffs have raised prices on many goods, although the tariff pass-through has been gradual as businesses built up inventory ahead of the tightening of trade policies and absorbed some of the taxes, as seen in modest increases in new motor vehicle prices.

Tariffs are hurting consumers

“Retailers are imposing tariffs on consumers and have passed on about 40% of the total tariffs to consumers by September,” said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. “We expect this to gradually climb to 70% by March and then stabilize.”

Economists say the burden of tariffs falls disproportionately on lower-income households, which have little savings buffer and have seen slower wage growth relative to other workers.

Trump, who won the 2024 presidential election on a promise to curb inflation, has alternated in recent weeks between dismissing affordability issues as a hoax and blaming former President Joe Biden and promising Americans would benefit from his economic policies next year.

Core CPI is expected to rise 3.0% year-on-year in November. This would match September’s gains and reflect higher rents and commodity prices (excluding food and energy). Lower airfares, hotel and motel rooms can provide some offset.

The Fed tracks the personal consumption expenditures price index to achieve its 2% inflation target.

The PCE price indicator is calculated based on certain components of the CPI and producer price index baskets. The October PPI report was cancelled. The November producer inflation report will be released in mid-January. The government has not set a new release date for November PCE price data. PCE price indicators in September were well above targets.

Fed officials last week cut the Fed’s benchmark overnight rate by another 25 basis points to a range of 3.50% to 3.75%, but signaled borrowing costs were unlikely to fall further in the short term as they awaited clarity on the labor market and the direction of inflation.

“Tariffs are actually the main cause of overshooting inflation,” Fed Chairman Jerome Powell told reporters.

It may take some time before consumers see prices drop as the White House lifts tariffs on some goods, including beef, bananas and coffee.

“As companies begin the year with a trend of revisiting pricing decisions, we see the potential for commodity inflation to flare up again in the first quarter,” said Sara House, senior economist at Wells Fargo.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)