Are the numbers reliable? Economists express concerns over the delayed CPI report, which indicates a decline in inflation. The Bureau of Labor Statistics (BLS) released the November consumer price index (CPI) report, showing an annual inflation rate of 2.7%, lower than the expected 3.1%. However, the core CPI, excluding volatile food and energy prices, was even lower at 2.6%. This surprising data has economists puzzled, as the October data was canceled, and the BLS had to make assumptions about previous inflation levels. Michael Gapen, a chief U.S. economist, suggests that methodological issues might be the cause, as the BLS may have carried forward prices in certain categories, effectively assuming 0% inflation. This has led to a 'noisy' reading, making it challenging to draw strong conclusions. The main concern is the 'owners' equivalent rent' (OER) data, which is crucial for calculating housing market inflation. UBS economist Alan Detmeister notes that the price changes for OER in October appear to have been set to zero, and Evercore ISI's Krishna Guha suspects that the BLS introduced zero inflation in multiple categories while calculating OER. This could have a lasting impact on the next few months' data. Stephanie Roth of Wolfe Research estimates that the rise in rent and OER over two months is relatively small. However, there are other factors at play, such as the BLS's data collection period falling during a time with more holiday discounts, which may have put downward pressure on certain goods categories. While the market initially interpreted the data as a dovish signal, economists expect the Federal Reserve to put less weight on this reading due to technical quirks. The report's release also sparked skepticism, with concerns about bias due to the government shutdown's impact. As the trading day progressed, Wall Street's enthusiasm waned, with technology stocks leading the decline and bank shares in the red. The yields also decreased from their lows. The controversy surrounding the report invites further discussion and analysis, as economists grapple with the implications of the delayed and potentially biased data.
