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Inflation Numbers Breed Cautious Optimism to Close 2022

Inflation is once again easing faster than experts expect, with consumer prices rising an unadjusted 7.1 percent year-over-year in November, according to the U.S. Bureau of Labor Statistics (BLS).

The Consumer Price Index (CPI) decelerated from October’s 7.7 percent increase, marking the fifth-straight month of slowdowns after peaking in June at 9.1 percent.

On a monthly basis, CPI rose a seasonally adjusted 0.1 percent in November after increasing 0.4 percent in October.

Economists surveyed by Dow Jones had been expecting a 7.3 percent 12-month price increase and 0.3 percent monthly. Core CPI, which excludes food and energy prices, rose 6 percent on an annual basis and 0.2 percent for the month, lower than the respective estimates of 6.1 percent and 0.3 percent.

Apparel prices rose an unadjusted 3.6 percent year over year, and declined 2.1 percent from October.

Within the overall category, women’s underwear, nightwear, swimwear and accessories saw the largest price hike at 8.6 percent over November 2021. Prices for women’s and girls’ apparel increased 5.6 percent for the year, whereas men’s and boys’ apparel saw 1.3 percent price increases. On the men’s side, suits, sport coats and outerwear had the highest price surge at 6.3 percent.

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Footwear prices rose 2.4 percent on an annual basis and inched down 0.9 percent since October 2022.

Furniture and bedding prices saw an unadjusted 6.8 percent spike year over year, while they dipped 0.8 percent from the prior month.

The overall November CPI is the lowest annual increase since December 2021’s 7 percent rise, coinciding with the Federal Reserve’s six interest rate increases since its near-zero point in March, which pushed the benchmark up to a new rate of 3.75 percent to 4 percent. The BLS report comes as officials at the U.S. central bank gathered for their final two-day policy meeting of the year on Tuesday.

The Fed is expected to raise interest rates for a seventh and final time this year on Wednesday. Late last month, Federal Reserve chair Jerome Powell hinted that the rate hike would be modest compared to the four previous increases of 75 basis points (0.75 percentage points) each. Rates are projected to be bumped up 50 basis points (.50 percentage points) for the final hike.

“It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” Powell said in a speech at the Brookings Institution in Washington, D.C. last month. “The time for moderating the pace of rate increases may come as soon as the December meeting.”

E-commerce prices fall, but apparel sees year-over-year uptick

The BLS wasn’t the only source offering promising data regarding inflation, with Adobe’s Digital Price Index (DPI) indicating that online prices fell 1.9 percent year-over-year and 3.2 percent month-over-month.

This marks the third consecutive month when online prices have fallen on an annual basis, and the largest year-over-year drop in the past 31 months, since May 2020.

The DPI complements the CPI by tracking goods exclusively sold online. Adobe’s figures also are not adjusted for inflation, but the company called the 1.9 percent price decline a clear sign that consumer spending has been driven by net-new demand, and not just higher prices.

With that in mind, the difference in price between the CPI and DPI is likely due to the latter being driven by heavy discounting during Cyber Week, the five-day period between Thanksgiving Day and Cyber Monday.

Despite the mass markdowns, Adobe Analytics reports that online apparel prices rose 3.3 percent from November 2021. On a month-over-month basis, apparel did decline from October 2022 at a rate of 2.2 percent, so the impact of deep discounts appears to have affected the month-to-month comparisons. Furniture and bedding prices inched up 0.6 percent on an annual basis, and sank 2.6 percent from month-ago totals.

In November, nine of the 18 categories tracked by the DPI saw price decreases from the year-ago month, with computers falling the most at 18 percent and electronics plummeting 13.3 percent.

Both categories saw the largest annual drops on record, since Adobe began tracking online prices in 2014. Holiday deals also drove down prices for toys (down 7.7 percent annually and 4.2 percent monthly) and sporting goods (down 5.7 percent annually and 4.3 percent monthly).

“While the November drop in online prices was driven by major discounting on days including Cyber Monday and Black Friday, we also see signs of overall e-commerce inflation cooling,” said Patrick Brown, vice president of growth marketing and insights, Adobe. “In categories such as groceries and personal care, which are not promotional in nature, we are seeing price increases come down from their heights in late summer and early fall.”

Apparel was one of nine categories that saw year-over year price increases, Adobe said, including personal care, office supplies, furniture/bedding, pet products, groceries, non-prescription drugs, tools/home improvement and medical equipment/supplies.

The DPI analyzes 1 trillion visits to retail e-commerce sites and more than 100 million SKUs across 18 product categories: electronics, apparel, appliances, books, toys, computers, groceries, furniture/bedding, tools/home improvement, home/garden, pet products, jewelry, medical equipment/supplies, sporting goods, personal care products, flowers/related gifts, non-prescription drugs and office supplies.