November 2012 Consumer Prices

Consumer inflation for November continues to slow, though you can’t really tell from the chart (log annual and monthly changes):

CPI inflation has been at about 1.3% (in log terms) for 5 straight months. Even the Pain Index is barely blipping, largely because food price inflation has also been trending down (log annual and monthly changes):

Apart from the aftermath of the recession, the last time food inflation was below 2.0% was in April 2004.

On the one hand, consumers might feel happier with slowing price increases. On the other hand, the reasons behind it – slowing global growth – isn’t exactly encouraging.

Looking ahead, the prognosis for inflation really depends on your view of growth prospects, especially internationally. If the US continues its recovery, and especially if China and India can post better growth numbers, inflation is likely to tick up to its long term average. That’ll take some of the burden of growth off consumption and investment. But of course, that also means faster price increases. You pick your poison.

Technical Notes:

November 2012 Consumer Price Index report from the Department of Statistics