Here’s the inflation breakdown for November 2022 — in one chart

Inflation was lower than expected in November amid a broad-based slowdown in consumer prices that have been rising at their fastest rate in decades.

The consumer price index, a key inflation barometer, jumped by 7.1% in November from a year earlier, the U.S. Bureau of Labor Statistics said Tuesday. Economists expected a 7.3% annual increase.

The CPI reading for November was the smallest 12-month increase since December 2021, and down from 7.7% in October.

“Across the board, we saw a moderation of inflation,” said Mark Zandi, chief economist at Moody’s Analytics. “That’s what’s most encouraging. It’s not one or two special factors.”

While many Americans feel those price changes acutely — given food and energy are household staples — they’re volatile categories more beholden to the whims of global economic forces and which largely can’t be controlled by U.S. policymakers. Take the war in Ukraine, for example: Russia’s invasion roiled oil markets earlier this year, and gasoline prices surged. (So did margarine, oddly enough, due partly to the war’s impact on sunflower oil from Ukraine, the world’s largest producer.)

In other words: “core” inflation gives a better sense of the future inflationary trend in the U.S., economists said.

When inflation is low and stable, monthly core inflation is roughly 0.2%, on average, said Andrew Hunter, senior U.S. economist at Capital Economics.

Core CPI rose 0.2% in November, after a 0.3% reading in October — down significantly from 0.6% in September and August.

“One month doesn’t make a trend, or even two months, but the October and November readings are clearly a big step in the right direction,” Hunter said.

Food, energy and housing have been among the larger pain points for households in recent months.

Housing represents the biggest share of average consumer budgets, accounting for 34% of household spending in 2021, according to the most recent U.S. Department of Labor data. Transportation, which includes gasoline, and food are No. 2 and No. 3, respectively, at 16% and 12%.

“The good news is, we’re seeing energy prices and food prices come off their highs,” said Diane Swonk, chief economist at KPMG. “We welcome that with open arms.”

Housing may prove to be stubborn for some time, however, given there’s typically a lag in rent and home price trends flowing through to the consumer price index.

The “shelter” index is up 7.1% over the last year, accounting for about half of the increase in annual “core” inflation, according to the BLS. While shelter inflation moderated a bit from October to November, shelter was “by far the largest contributor” to the monthly inflation, more than offsetting decreases in energy indexes, the BLS said.

“Rent inflation is still yet to slow meaningfully, but we know from the private-sector rent data that a sharp slowdown is coming there too,” Hunter said.

The dynamics that had underpinned high inflation for physical goods seem to be retreating, Hunter said. Supply-chain issues have largely faded, while a strong U.S. dollar relative to foreign currencies generally makes it less costly to import goods from overseas, he said.

But inflation for “services” has proven “a bit stickier,” Hunter said. Labor costs are a big driver of inflation in the services sector, which might include anything from haircuts to hotel stays. Demand for workers is near historic highs and the unemployment rate low, helping fuel competition for workers and therefore fast-rising wages — in turn feeding through to high labor costs to businesses, creating upward pressure on their cost of services.

Russia’s invasion of Ukraine also fueled a surge in commodity prices — for crude oil and grain, for example — which has fed into higher costs for gasoline and food. High energy costs have broad ripple effects on other goods, which become more costly to produce and transport.

Other one-off events have also weighed on inflation. For example, one of the worst cases of bird flu in U.S. history has led the price of eggs to surge more than most other food categories this year. The price of eggs is up 49% in the past year, according to Tuesday’s CPI report.

Severe drought in Western U.S. states like California and Arizona has reduced vegetable supplies, triggering big price increases.

Climate change, along with elevated geopolitical risk and aging trends, represent a “trifecta” of issues that create more inflationary pressure relative to before the Covid-19 pandemic, Swonk said.

For example, global extreme weather events can disrupt food supplies and supply chains, a wave of U.S. retirements have contributed to a smaller pool of available workers, and political tensions have led to more protectionism and self-sourcing — all of which have implications for inflation, Swonk said.

“I think we’re in a world that’s much more prone to inflation than the world we left,” Swonk said.

“What is the new equilibrium once we’ve gotten there?” she added. “That’s where the difficulty is.”

The U.S. Federal Reserve and other central banks are trying to make sense of these multi-pronged inputs and tamp down inflation by raising borrowing costs for consumers and businesses. The dynamic serves to reduce demand, ultimately filtering through to prices. That’s likely to be a lengthy process, according to some economists.

“Inflation has likely already peaked in most markets, but reducing price pressures tied to labor markets and wage growth will take longer,” Vanguard Group economists wrote in an outlook report published Monday. “As such, central banks may reasonably achieve their 2% inflation targets only in 2024 or 2025.”