Inflation is on a sustained path downward both for the Twin Cities and the U.S., according to the latest batch of data released Tuesday from the U.S. Bureau of Labor Statistics. People in the Minneapolis-St. Paul area got more relief last month from big price hikes than the rest of the U.S. This region saw a smaller year-over-year increase in the consumer price index in November — 5.3% compared to 7.1% for the U.S. Both were the lowest readings of the year. Since hitting a high of 8.7% in May, inflation in the Twin Cities has been cooling off now for three readings in a row. The regional numbers come out every other month. The consumer price index for the U.S., which comes out every month, has also been coming down after hitting 9.1% in June, the highest level in four decades.
Food costs still rising fast
Food prices are still going up rapidly. Prices were 13.7% higher last month than a year earlier in the Twin Cities, the most expensive this year. Meanwhile, U.S. food prices have been cooling off slightly in recent months but are still seeing big increases, rising 10.6% in November. Flour, eggs, butter and margarine experienced some of the biggest year-over-year increases of 20% or more nationally. Meanwhile, a handful of categories, such as beef and bacon and related products, saw price declines.
Gas prices going down
Gas prices are now nearly as low in Minnesota as they were a year ago. After surging to as much as $4.76 a gallon in June, gas prices in Minnesota are now back to just over $3 a gallon, according to AAA. Prices here and nationally have been going down —demand for oil and gas has been falling as countries, particularly in Europe, brace for a recession. The most recent inflation data reflects where we were last month, with fuel prices increasing 12.6% for the Twin Cities over the year and 10.8% for the U.S., much lower than the 40% to 50% hikes logged earlier this year.
Car prices moderating
New and used motor vehicles was one of the first major categories to see a big run-up in prices starting in spring 2021, a precursor to the more widespread inflation that starting showing up in other areas of the economy this year. But price increases in this category are finally moderating, rising less than 1% last month in the Twin Cities and 3.6% in the U.S. Vehicle production has been picking up as the supply of semiconductors has been slowing catching up. Meanwhile, the increased availability of new cars has cooled off the red-hot demand for used cars.
Rents starting to slow
Housing inflation largely reflects what's happening with rents as well as utility costs. (It does not include housing prices, which have been cooling off as the Federal Reserve has been hiking interest rates to tamp down on inflation.) After a big year of rent increases, there are many signs that rents are starting to come down — and are expected to further fall next year. In November, housing costs in the consumer price index rose 3.8% for the Twin Cities and 7.8% for the U.S.
Services cooling off, too
The big rise in inflation was initially driven by reduced supplies of goods due to manufacturing and shipping constraints. But more recently, services have been the culprit — things like medical costs, transportation and rent. The main driver of price increases in this category tends to be wage increases. Services inflation showed some signs of slowing last month in the Twin Cities, rising just 4.3% over the year. But it was higher for the U.S. at 7.2%. Federal Reserve officials are closely watching this category because they worry inflation in this realm may be stickier and take longer to come back down.
Research: MaryJo Webster, Star Tribune
Charts: Mark Boswell, Star Tribune
Source: Bureau of Labor Statistics
