The latest U.S. inflation data for November delivered a "surprise" to markets, with energy and food prices remaining the primary drivers of overall CPI, while core inflation showed notable softening. According to GLMS SEC, while the November CPI is unlikely to alter the Federal Reserve's decision to pause rate cuts in January, it may amplify dovish voices within the Fed. If December data continues the current slow-growth trend, it could prompt a reassessment of next year's rate-cut trajectory—though conclusive judgments await the release of "cleaner" December figures.
Key insights from GLMS SEC: As the final major U.S. economic release of the year, November’s inflation data significantly undershot expectations. Headline CPI and core CPI year-over-year growth dropped sharply to 2.7% and 2.6%, respectively—well below the consensus forecast of 3% and marking core inflation’s lowest level since early 2021. Markets reacted optimistically: the dollar dipped briefly, equities and bonds rallied (with the Nasdaq up over 1%), while precious metals saw profit-taking after an initial surge.
However, the November data carries notable statistical "noise." A government shutdown severely disrupted the Labor Department’s data collection, leaving October’s inflation figures and November’s month-on-month data incomplete. Additionally, price surveys for November only covered the latter half of the month—coinciding with holiday promotions like Thanksgiving—potentially distorting seasonal price fluctuations.
Despite data quality concerns, the report offered a glimmer of hope, easing near-term inflation worries. With the Fed’s rate-cut window narrowing, only sharply better- or worse-than-expected economic data could significantly sway markets. November’s CPI achieved what the nonfarm payrolls report could not: it took the critical "first step" toward reshaping expectations.
Structurally, energy and food inflation remained the primary CPI supports, while core inflation weakened distinctly: - Food and energy inflation stayed elevated, aligning with high-frequency data. Gasoline prices rose further year-over-year, while global food prices rebounded from September levels. - Core goods inflation dipped slightly to 1.4%, dragged by auto price declines (likely tied to expiring EV tax credits), though tariff-sensitive categories like apparel and furniture maintained higher price growth. - Core services drove the overall core inflation slowdown: housing inflation plunged from 3.6% to 3.0%, reflecting persistent high-rate demand suppression, while "super-core" inflation (ex-housing) fell from 3.2% to 2.7%, led by transport (especially airfares) and recreation services.
Risks: Unexpected shifts in U.S. trade policy or tariff escalations could accelerate global economic slowdowns and market volatility.
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