< Inflation dips in November, as gasoline savings eclipse grocery price increases

ROB SCHMITZ, HOST:

We got an update on inflation this morning from the government's official price checkers. November's consumer price index figures come out just as the Federal Reserve is preparing for another boost in interest rates. Inflation in November was a little bit tamer than the month before, but overall, prices are still climbing at a rapid rate. NPR's Scott Horsley joins us this morning to talk about the numbers. Good morning, Scott.

SCOTT HORSLEY, BYLINE: Good morning, Rob.

SCHMITZ: Scott, we've all seen the drop in gasoline prices in recent weeks. Is that keeping inflation in check?

HORSLEY: It certainly helps. Annual inflation in November was 7.1%. That's down from 7.7% the month before. It's actually the lowest annual inflation rate we've seen since last December. And a big part of that was the 2% drop in gasoline prices between October and November. Unfortunately, some of the savings that people are enjoying at the gas station are being gobbled up in the grocery store, especially in the produce department. And that's largely due to an insect-borne virus in California that put a big dent in the lettuce crop. Retail lettuce prices soared nearly 9% last month. If it makes you feel any better, though, price hikes at the wholesale level were even larger. Produce distributor Brian Guarino says a wholesale box of lettuce that would typically sell for $25 to $30 on the East Coast is now costing as much as $100.

BRIAN GUARINO: I've never seen it like this. I've seen it go $80, $85. I've never seen triple digits, though. It's just crazy. I mean, you can't put lettuce on a hoagie and expect not to put an upcharge on it when you're paying $100 for 24 heads of lettuce.

HORSLEY: Some restaurants have been substituting less expensive kale for pricey lettuce, although Guarino told me who wants to eat kale compared to romaine?

SCHMITZ: Put some kale on that hoagie. Is anything coming down in price besides gasoline?

HORSLEY: Yes. Used car prices were down last month. New car prices were flat, which is better than it has been. Goods prices overall are not climbing nearly as fast as they were earlier in the year. Rents continue to rise, but it looks like the worst of rental inflation may be behind us. Selma Hepp, who's with the housing data firm CoreLogic, says that's partly because rents have already climbed so high in some places that people are being priced out of finding their own place.

SELMA HEPP: People are now, as a result of high rents, doubling up again. So we're seeing an increase in number of people who are moving in with roommates.

HORSLEY: Hepp says that slowdown is particularly noticeable in places where rents had been rising the fastest, like Miami and Phoenix.

SCHMITZ: Scott, will this morning's numbers have any impact or effect on the Federal Reserve as it tries to get prices under control?

HORSLEY: You know, the Fed still has a ways to go, even though goods prices have started to level off. And there are encouraging signs about what's happening in the housing market. Fed Chairman Jerome Powell is worried that the price of services, things like haircuts and dry cleaning, are still going up. And we spend a lot of money on services. So Powell is concerned those price increases could keep overall inflation much too high.

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JEROME POWELL: My colleagues and I are acutely aware that high inflation is imposing significant hardship, straining budgets and shrinking what paychecks will buy. This is especially painful for those least able to meet the higher costs of essentials like food, housing and transportation.

HORSLEY: So the markets are certainly encouraged by this inflation report, which is a little better than expected. The Dow jumped close to 500 points right out of the gate this morning. But, you know, the Fed has been very clear that interest rates are going to go higher and likely stay up longer if that's what it takes to tamp down demand and bring prices under control.

SCHMITZ: NPR's Scott Horsley, thank you.

HORSLEY: You're welcome.

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