The Consumer Price Index was unchanged in November, with the change over the last 12 months increasing by 0.5%-- the largest annual increase since the 12-month period ending December 2014. Similarly, the index for all items less food and energy rose 2.0%--the largest 12-month increase since May 2014. Most categories in the service sector have shown acceleration over the past three months versus the last 12 months, suggesting that inflation pressures may be brewing.
Even as the energy index fell 1.3% on the month and a more dramatic decline of 14.7% on the year, the end to negative energy readings may be just around the corner. From December 2013 through January 2015, the price index for gasoline fell from 304 to 196—a decline of 36%. However, since January 2015, the price index for gasoline has been above 200 every month. The take-away is that beginning in January 2017 (for which the relevant CPI report is released in February), changes in gasoline prices should have a net positive impact in lifting the headline inflation index through April—barring a subsequent drop in gasoline prices (and oil specifically) through $30/barrel.