Truflation US Monthly Inflation Report – November 2025

Executive Summary

The holiday season has begun strongly, and the U.S. economy is expected to end the year on a solid footing. According to the BEA, GDP contracted 0.6% in the first quarter, while the second quarter saw a 3.8% increase. Initial estimates for the third quarter are scheduled to be published on December 23, but the latest projections from the Federal Reserve Bank of Atlanta, released on December 5, place third-quarter GDP growth at 3.5%. Growth in the fourth quarter is expected to slow due to the government shutdown.

Consumers, whose spending accounts for nearly 70% of GDP, remain pessimistic about the state of the economy. The University of Michigan’s consumer sentiment survey came in at 53.3 in December, up 4.5% from November but down 2.8% compared with the same time last year.

The latest inflation figures from Truflation have shown an upward trend since April. However, the most recent report from the Bureau of Labor Statistics—delayed due to the government shutdown—showed consumer prices rising 3% year-over-year in September. As rising prices continue to strain households, President Donald Trump has pushed back on the idea that Americans are struggling financially, but he has announced two new task forces to investigate food prices.

The latest personal consumption expenditure data for September showed an annual rate of 2.8%, slightly below the 2.9% estimate, with a monthly increase of 0.3%. The report also shows personal income rising 0.4% on the month, while the personal savings rate remained unchanged from August at 4.7%.

Recent labor market indicators are mixed. There are signs of softening in hiring, with Truflation showing an increase in layoffs, contributing to the unemployment rate rising to 4.4% in September. However, initial jobless claims recently fell to multi-year lows, suggesting employers remain cautious about layoffs amid economic uncertainty.

The S&P 500 secured its fourth straight winning day last week as investors digested inflation data that could motivate the Federal Reserve to lower interest rates this week. According to the CME Group’s FedWatch tool, the odds of a rate cut at the upcoming Fed meeting held at 87.2% following the report. However, policymakers remain unusually divided on the path forward. One faction of the FOMC supports further cuts to prevent additional weakness in the labor market, while another remains concerned about inflation risks and favors keeping rates in a more restrictive stance.

The Labor Market is on a knife-edge

Although the unemployment rate has risen to 4.4%, it has remained relatively stable around 4%, supported by a shrinking labor pool driven by restrictive immigration policies and a wave of retirements. At the same time, job hires are declining rapidly, and layoffs—though only moderately higher this month—could, if accelerated, place additional pressure on the labor market. Truflation data shows a contraction in the nonfarm labor force in November, while other private indicators suggest that wage growth has also slowed.

Exhibit 1 – Truflation Monthly change to Nonfarm Payroll

Hiring has been uneven recently, as employers navigate cautious consumer behavior and an uncertain macroeconomic environment. The November decline was broad-based but was largely driven by small businesses—historically considered the engine of the economy and a key driver of job growth. Small businesses, defined as those with 0–49 employees, reduced headcount by 120,000, while companies with 500 or more employees added 39,000, according to ADP.

Adding to this trend, Challenger, Gray & Christmas reported that in November, companies announced 1,170,821 layoffs—an increase of 54% compared with 761,358 over the first 11 months of last year. Year-to-date job cuts are now at their highest level since 2020, when 2,227,725 layoffs were recorded through November.

Despite these developments, corporate earnings growth in the latest quarter suggests that healthy business fundamentals could help prevent a significant downturn in nonfarm payrolls, while continuing to drive structural shifts in the labor market.

Inflation Update – The upward pressure is still there

The Bureau of Labor Statistics (BLS) is scheduled to release the November Consumer Price Index (CPI) on December 18. This release is delayed from its usual mid-month schedule due to the government shutdown, which prevented October data collection. As a result, October figures may be included alongside November data, creating some uncertainty about the final CPI reading and the insights it will provide for the Federal Reserve.

In the absence of official data, Truflation has continued to use real-time pricing information to provide an alternative measure of price movements. According to its latest update, Truflation projects a 2.9% year-over-year increase in the BLS CPI for November, unchanged from October and broadly in line with market expectations, which range from 2.9% to 3.0%.

The forecast reflects changes in consumer spending patterns, particularly within goods categories. Goods inflation has been trending lower as households adjust to higher prices, supported in part by improved harvests and supply dynamics for items such as tomatoes, lettuce, and televisions. Additionally, President Trump issued an Executive Order rolling back tariffs on more than 200 food and agricultural products that were previously subject to a 10% baseline tariff. These products include coffee, tea, beef, tropical fruits, spices, nuts, and various grains. While the measure aims to ease grocery prices and curb inflation, the full impact on consumers is expected to take several months to materialize.

Exhibit 2 – Truflation Key Inflationary Metrics: Goods vs Services vs Core

Meanwhile, the services sector continues to experience elevated prices, driven in part by a tight labor market pushing up wages, strong demand, rising energy costs, and higher healthcare expenses associated with an aging population. Core CPI, which excludes food and energy, has cooled slightly, supported by easing goods inflation.

Economic activity in the services sector continued to expand in November, with the ISM Services PMI rising to 52.6, surpassing forecasts and marking another month of growth this year. The increase was driven by business activity, new orders, and an expansion in the employment index. The survey also showed that the prices index remained above 60 for the twelfth consecutive month, highlighting persistent cost pressures.

In contrast, the manufacturing sector contracted for the ninth consecutive month, with the ISM Manufacturing PMI slipping to 48.2 in November from 48.7 in October. Of concern, the backlog of orders declined by 3.9 points, suggesting a weaker outlook, while price pressures increased slightly. Manufacturing activity continues to face challenges from slower supplier deliveries, declining new orders, and employment softness, underscoring ongoing economic uncertainty.

Exhibit 3 – Truflation Category Inflation Drivers

The largest upward contributors to inflation in November came from apparel, household durables, utilities, and education, while housing, transportation, and Recreation & Culture exerted downward pressure on overall prices. This mix reflects shifting consumer behavior as well as ongoing supply-side influences, including tariffs and energy demand.

Current inflation trends align closely with Truflation’s earlier forecasts, which anticipated moderate but persistent upward momentum through the end of the year. Tariff effects are expected to continue impacting certain categories as inventories are rebuilt, though for items such as food, their influence is likely to be more muted going forward.

Utilities and imported goods remain under notable cost pressure. In particular, energy demand—partly driven by the rapid expansion of AI and data centers—is contributing to higher utility prices. This trend may continue to feed through to both producer and consumer prices in the coming months, presenting a persistent challenge to inflation moderation despite broader cooling in goods categories.

Sector-Specific Inflation Drivers

• Apparel: +1.4% MoM | +4.1% YoY.  Apparel prices are rising primarily due to increased import tariffs, which have driven up wholesale costs. Brand owners have found it unavoidable to pass these expenses onto consumers, resulting in higher final prices. A secondary factor is the late start to fall, delaying seasonal discounts; coats and jackets, which normally would see markdowns by late November or early December, remain at elevated prices. Within fashion categories, jackets and outerwear have experienced the highest price increases, according to AlixPartners.

• Household Daily Use Items & Durables: +1.2% MoM | +4.4% YoY.  Prices for staples, such as trash bags, remain elevated, while furniture costs are rising due to tariffs, supply chain disruptions, and logistics. Consumers are adapting by choosing lower-cost alternatives or shopping at retailers with promotional activity to take advantage of inventory reductions. Services related to household operations, however, are seeing notable price increases of 1.4% MoM, driven by higher labor costs amid workforce shortages.

• Utilities: +0.8% MoM | +6.1% YoY.  Utility costs are rising sharply, with the average household paying 9.6% more in 2025 compared to 2024, outpacing both wage growth and overall inflation. The Center for American Progress reports that at least 222 electric and natural gas utilities have implemented, been approved for, or proposed rate increases between 2025 and 2027. Drivers include the need to modernize aging electric grids stressed by extreme weather, rising energy demand from AI data centers, higher natural gas costs, and regulatory challenges to new clean energy generation. Home heating costs this winter are expected to continue outpacing general inflation.

• Education: +0.5% MoM | +2.3% YoY. Education costs are rising due to increased institutional budgets for technology and supplies, higher faculty compensation, and growing demand for student support services. These pressures continue to exacerbate affordability challenges for both educators and parents.

• Housing: -0.5% MoM | +0.2% YoY.  Owned property prices are declining, driven by persistently high mortgage rates, a rise in housing inventory, longer time on the market, and general economic uncertainty, prompting sellers to reduce prices to attract buyers. While home prices and loan rates are gradually easing, many homeowners remain reluctant to give up the low 3% mortgage rates secured early in the pandemic. Most forecasts anticipate a gradual slowdown in home price growth over the next year. Fannie Mae’s Home Price Index projects year-over-year growth falling from 2.5% this quarter to 1.2% by the end of 2026, potentially improving affordability nationwide.

• Transportation: -0.4% MoM | +1.8% YoY.  Prices in this category are consistently declining, including vehicle purchases, gasoline, vehicle expenses, and public transportation. Vehicle prices are the largest contributor to the decline, driven by the sale of older inventory, arrival of higher-priced new stock, greater dealer discounts, and a shift toward less expensive vehicles. Gasoline prices have also eased due to higher global crude oil supply and weaker demand.

• Recreation & Culture: -0.4% MoM | +1.7% YoY.  Prices for recreation and cultural equipment and supplies have fallen, reflecting technological advancements, improved production efficiency, and a shift toward digital and at-home entertainment. Out-of-home entertainment, however, remains more expensive due to the labour-intensive nature of in-person experiences such as concerts, sports, and lessons.

Inflation Outlook: Short to Medium Term

The inflation outlook for late 2025 and early 2026 points to continued pressure, primarily driven by tariffs. Forecasts predict inflation will hover in the low-to-mid 3% range, potentially peaking around 4% due to price shocks. The key question remains whether these pressures are temporary or persistent. While actual inflation data cooled in mid-2025, consumers and some economists expect price increases in key areas such as utilities, medical care, and education. Meanwhile, the Federal Reserve remains cautious, balancing weaker labor market data with inflation concerns and considering potential rate cuts. Several key themes are emerging:

• Tariff Impact: New tariffs are a major factor expected to push inflation higher, although the speed and persistence of this effect are debated. The rollback of tariffs on food items also needs to be considered in the overall inflation outlook.

• Consumer Sentiment: Consumers remain pessimistic, anticipating price spikes in specific goods despite overall cooling in inflation expectations.

• Federal Reserve Actions: The Fed is monitoring conditions closely. Weak labor market data could create room for interest rate cuts, even if inflation remains above target.

• Mixed Signals: Upside risks, such as tariffs, are counterbalanced by downside risks from weakening growth and labor markets. This creates potential for temporary price shocks while keeping concerns about sustained inflation alive.

Major banks, including Bank of America, expect core inflation to ease slightly in 2026 after a first-quarter bump. Similarly, the New York Fed’s November Survey of Consumer Expectations shows households anticipating inflation at 3.2% a year from now, holding steady from October, signalling an improved outlook. However, higher expected costs for food, gas, medical care, and education, combined with labor market concerns, continue to weigh on inflation expectations.

Exhibit 4 – Consumer Inflation Expectations (2% is the Fed Target)

Source: Federal Reserve Bank of New York & University of Michigan

Conclusion: “Inflation will rise further before it cools.”

Upward inflationary risks are expected to persist for the remaining part of the year as the market gauges the impact of tariffs, energy-related price pressures, and fiscal-driven demand stemming from the OBBBA. How resilient will the consumers remain in sustaining growth in light of further inflation growth? While the Federal Reserve is expected to reduce rates by 25 bps at its next meeting, it is the moves in 2026 with inflation still above target and increasing against a backdrop of shifting economic data that will no doubt polarise the committee in the coming meetings.

About Truflation

Truflation provides a set of independent inflation indexes drawing on 30+ data partners/sources and more than 15 million product prices across the US. These indexes are released daily, making it one of the most up-to-date and comprehensive inflation measurement tools in the world. Truflation has been leveraging this measurement tool to predict the BLS CPI number, with a 99.94% accuracy in predicting inflation in the last 12 months.

APPENDIX A

Truflation Category Percentage Change Data

Month-over-Month and Year-over-Year

All Data is based on November 2025

Truflation US Monthly Inflation Report – November 2025

Report Presentation Deck

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About Truflation

Truflation delivers independent inflation and macroeconomic indexes by aggregating over 100 million data points from 100+ data sources. Truflation indexes update daily, providing one of the most comprehensive and up-to-date inflation measurements in the world. Truflation has also leveraged this data to forecast the BLS CPI with 99-97 percent accuracy over the past 12 months.