The US CPI fell by 1.7% in November while Core CPI came in flat, the Bureau of Labor Statistics reported today. Expectations had been for a 1.2% drop in headline CPI and a 0.1% increase in the Core number.

The decline in headline CPI is the largest MoM decline since records began in 1947 and it drags the YoY figure to just 1.1%, the smallest rate of consumer inflation since June 2002. The biggest monthly price reductions were seen in transportation and energy, down 9.8 and 17.0 percent respectively. Incidentally, both of these sectors sit firmly in negative territory for the last year. Energy is down by 13.3% and transportation by 8.9% in the 12 months ending November.

Core CPI now stands at 2.0% YoY, lower than the 2.1% that had been expected and below October’s 2.2% reading. It remains to be seen whether the Fed has already priced this reduction in consumer prices into its upcoming Federal Funds Rate announcement. At present time the consensus estimate is for a 0.50 percent cut by the Fed which will take the Federal Funds Rate down to just half of one percent.

**In the last few minutes it has been announced that The Fed has cut the Federal Funds Rate by more than expected to 0.25%, a 0.75% cut.**

Wholesale inflation fell by 2.2% in November, the US Bureau of Labor Statistics reported today, completing a fourth straight monthly decline. The consensus estimate had been for a 2.0 percent drop following on from October’s record drop of 2.8%.

PPI MoM for the last 12 reporting periods

Leading the declines in November were energy prices. After a 12.8% drop in October, energy was down 11.2% for the month of November. Liquefied petroleum gas and home heating oil accelerated declines in November, down 25.7 and 23.3 percent respectively after 24.9 and 9.6% declines one month earlier. Declines slowed in residential natural gas and unleaded premium and mid-premium gasoline.

Prices for consumer foods came in unchanged after a fall of 0.2% in October. Within the index, eggs posted the sharpest monthly fall, down 18.2% with milled rice and pork both down 5.3%. Fresh fruit and vegetables were up by 2.1 and 3.8 percent respectively.

The Producer Price Index shows that wholesale prices are 0.4% higher than they were at the same time last year. However, this has fallen sharply from the peak of 9.9% in July and 5.2% just one month ago. Indeed, the current yearly figure is the lowest seen since January of 2007 and is further evidence that price pressures are falling away sharply in the US.

Elsewhere the Core PPI was up 0.1% MoM and inline with economists’ expectations. Traders had been expecting a moderation following the 0.4% seen in October. On a yearly basis the core number, which strips out the volatile food and energy components, is up by 4.2%.

Aside from the headline number for finished goods the index for intermediate goods fell by a record 4.3% while crude goods were down by 12.5%. Last month Intermediate goods dropped by 3.9% while crude goods fell by 18.6%.

The US Consumer Price Index fell by the highest amount since monthly records began in 1947, the Bureau of Labor Statistics reported today.

The seasonally adjusted CPI for All Urban Consumers (CPI-U) fell by 1.0% MoM in October, worse than the -0.8% economists had expected. This leaves the YoY number at 3.7%, down from the 4.9% seen in September. Incidentally the YoY growth of 3.7% in the smallest increase in a year.

Leading the index lower were Energy (-8.6% MoM) and Transportation (-5.5% MoM). The compound annual rate for the 3 months ending in October makes interesting reading for these two sectors. Transportation is down 26.2% while Energy has fallen a whopping 43.1%. On an annual basis these two components now stand at 4.2% and 11.5% respectively.

Elsewhere the Core Consumer Price Index came in worse than expected at -0.1%. Consensus estimates had been for a 0.1% MoM increase. The Core rate strips out the volatile Food and Energy sectors and is the Fed’s preferred inflationary indicator.

As you might expect, today’s number gave little encouragement for interest futures which continue to fully price in a 0.50% cut at the Fed’s December 16th meeting. This would take the Federal Funds Rate to 0.50% a full 4 percent lower than this time last year.