The consumer price index rose 2.7% on an annual basis in November, the Labor Department announced Thursday. The results were a pleasant surprise, beating expectations for a 3.1% increase, a modest increase over the September reading of 3.0%.
The core inflation measure, which strips out volatile food and fuel prices, was also better than expected, coming in at 2.6% annually and 0.2% on a two-month basis going back to September.
‘Anomaly after anomaly’: Some economists are wondering, though, if the November report is accurate following the record-long government shutdown, which disrupted data collection for about six weeks starting on October 1. The Bureau of Labor Statistics did not collect data during October and did not provide an estimate of inflation for that month. The agency began collecting data later than usual in November, and relied on some “nonsurvey data sources” to make calculations.
“This one-of-a-kind report produced anomaly after anomaly, almost all pointing in the same direction,” Stephen Stanley, chief U.S. economist at Santander US Capital Markets, said in an analysis, per Bloomberg. “I think it would be unwise to dismiss the results entirely, but I also believe it would be rash to take them at face value.”
The housing numbers were a particular concern. The November report shows rents increasing by just 0.06% over two months, with owner’s equivalent rent up just 0.14%. That suggests the BLS assumed there was almost no housing inflation in October.
“This is totally inexcusable,” Omair Sharif, president of Inflation Insights, said in a note to clients. “I am sure they have a good technical explanation for this, but the only way you get a two-month average for rent of 0.06 percent and [owner-occupied rent] at 0.135 percent is assuming October was zero. There is just no world in which this was a good idea, but here we are.”
Alan Detmeister, an economist at UBS, told The Wall Street Journal that the report should come with a very large asterisk. “I think you largely just put this one to the side,” he said. “Maybe this report gives a minor downward sign for overall inflation, but the vast, vast majority of this is just noise and should be ignored.”
Before any firm conclusions can be made about the course of inflation, economists will need to see more solid data. “The upshot is that it looks like we all have to wait until the December data is published next month to verify whether this is a statistical blip or a genuine disinflation,” Paul Ashworth, chief North America economist at Capital Economics, said in a note.