Updated December 13, 2022 at 8:51 AM ET

Americans are saving money at the gas pump, only to spend it in the produce aisle.

Gasoline and grocery prices moved in opposite directions last month, as the overall inflation rate declined slightly. Consumer prices in November were up 7.1% from a year ago, compared to an annual increase of 7.7% the month before.

It was the smallest 12-month increase since December of last year.

The inflation figures were released Tuesday by the Labor Department, just as the Federal Reserve prepares to raise interest rates for the seventh time in nine months on Wednesday.

For a year, Americans have seen racing inflation eat away at their savings and add to their credit card debt. A key source of pain was costly gasoline.

But gasoline prices dropped 2% between October and November and gas is now selling for less than it was a year ago, before Russia's invasion of Ukraine.

As fuel prices fall, however, food prices have been climbing. Grocery prices rose 0.5% in November, led by a whopping 8.9% jump in the price of lettuce.

"I've never seen it like this," said Brian Guarino, a produce distributor outside Philadelphia.

A wholesale box of romaine lettuce that typically sells for $25 to $30 on the east coast is costing up to $100, as a result of growing problems in California and high transportation costs.

"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," Guarino said.

An insect-borne virus curbed lettuce production in the Salinas Valley this fall. And while gasoline prices have tumbled, the diesel fuel used to truck vegetables still costs nearly $5 a gallon.

While food and energy prices are notoriously volatile, the prices of many other goods appear to be stabilizing. Used car prices fell 2.9% between October and November, while new car prices were flat.

"It is far too early to declare goods inflation vanquished," Fed chairman Jerome Powell said two weeks ago, about the stabilization. "But if current trends continue, goods prices should begin to exert downward pressure on overall inflation in coming months."

People are getting roommates and, in turn, easing housing inflation

Likewise, there are signs that housing inflation has begun to ease. Rents are still rising much faster than they were before the pandemic, but not at the breakneck pace they were in the spring.

Shelter costs rose 0.6% in November, down from 0.8% the month before.

The average cost of renting a single-family home in April was nearly 14% higher than a year earlier, according to CoreLogic, a housing data company. By September, the annual increase had dropped to around 10%, partly because of softening demand.

"People are now, as a result of high rent, doubling up again, so we're seeing an increase in the number of people moving in with roommates," said CoreLogic economist Selma Hepp.

"There's still some ways to go," Hepp said, adding that she expects "very fast deceleration over the next year."

Rents are reflected only gradually in the official inflation data, so the slowdown in housing costs is not yet fully evident in the consumer price index.

Still, Powell described the real-time reports from the rental industry as encouraging, with inflation in new leases falling.

"We would expect housing services inflation to begin falling sometime next year," Powell said.

Wages still pose an inflation threat

The Fed chairman is less confident about the price of services, which includes everything from restaurant meals to haircuts and which is largely driven by the cost of labor.

Wages have been rising at a rapid rate, and Powell worries that could keep inflation stubbornly high.

"Despite some promising developments, we have a long way to go in restoring price stability," he said.

Fed policymakers are meeting this week, and they're widely expected to raise interest rates by another half percentage point, in an effort to tamp down demand and bring prices under control.

Interest rates have already risen from near zero in March to nearly 4%. Powell warned rates are likely to climb higher and stay up longer, adding that history cautions against easing up on the fight against inflation too soon.

"We will stay the course until the job is done," he said.

Copyright 2022 NPR. To see more, visit https://www.npr.org.



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.


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. Transcript provided by NPR, Copyright NPR.

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