CPI shows cooling prices but reliability questioned
U.S. inflation eased to 2.7% in November, according to data released Thursday by the Bureau of Labor Statistics, offering what appears to be welcome relief for consumers. However, economists caution that the figure may not fully reflect underlying price pressures because of disruptions caused by the recent government shutdown.
Unusual data collection raises doubts
November’s inflation report was compiled under abnormal conditions, as October data was never collected during the 43-day government shutdown. As a result, statisticians were forced to make adjustments to generate the Consumer Price Index, or CPI, raising concerns about accuracy.
“It’s possible that this does reflect a genuine drop off in inflationary pressures,” said Paul Ashworth, chief North America economist at Capital Economics. “But such a sudden stop, particularly in persistent services like shelter, is very unusual outside of a recession.”
Economists warn of potential rebound
Morgan Stanley economists echoed that caution, noting it is difficult to draw firm conclusions from a report missing a full month of data. They warned inflation could reaccelerate in December once price collection resumes under normal conditions.
Federal Reserve Chair Jerome Powell also urged skepticism, stating policymakers must interpret the figures carefully given how the data was gathered.
Food and housing drive the slowdown
The most notable price relief appeared in food and shelter. Food inflation slowed to an annual rate of 2.6% in November, down from 3.1% in September. Shelter inflation, which includes rent and mortgage-related costs, eased to 3.0% from 3.6% over the same period.
Energy prices remain a pressure point
Despite broader easing, energy costs continued to rise sharply. Energy prices climbed 4.2% over the past year, with electricity prices alone up 6.9%, according to the BLS. These increases continue to weigh on household budgets.
Markets and Fed policy implications
The inflation data briefly lifted stocks, but gains faded as doubts emerged. By midday, the S&P 500 was up 0.5% and the Nasdaq Composite rose 1.1%. The report may still support further Federal Reserve rate cuts, particularly as labor market data shows signs of softening.
Unemployment rose to 4.6% last month, and job cuts increased in October, factors that influenced the Fed’s recent decision to lower interest rates despite incomplete inflation data.
December data seen as crucial
Economists expect the next inflation report, due in mid-January, to provide a clearer picture of price trends. With data collection returning to normal, December figures are likely to confirm whether November’s slowdown was meaningful or temporary.