Economists have raised serious concerns over the credibility of the US government’s November inflation report, describing key figures as distorted and unreliable, particularly in the housing sector.
Eko Hot News reports that the Consumer Price Index (CPI) showed inflation easing to 2.7% year-on-year, while core inflation fell to 2.6%, the lowest level recorded in several years.
At face value, the data suggested cooling price pressures and offered apparent relief to consumers and policymakers. However, economists quickly flagged inconsistencies that cast doubt on the accuracy of the report.
Housing costs, which account for more than 40% of core inflation, appeared to show virtually no increase in October, an outcome experts described as implausible.
Chief Economist at KPMG, Diane Swonk, described the figures as “wacky,” noting that shelter costs were essentially flat because October data was carried forward from September.
She explained that the distortion stemmed from the prolonged US government shutdown, which disrupted the Bureau of Labor Statistics’ ability to collect price data during October and into November.
When data collection resumed, the agency could not retroactively gather missing prices and instead relied on statistical assumptions that treated some categories as unchanged.
Swonk warned that these assumptions have lasting consequences, as they anchor future inflation readings and prolong the distortion beyond a single month.
She said while housing inflation was expected to cool, the reported zero increase was “too much” and did not reflect real market conditions.
Other anomalies further weakened confidence in the report. Gasoline prices, which declined during the period, showed an increase on a seasonally adjusted basis.
Daycare costs, previously among the fastest-rising services, also unexpectedly fell.
Joseph Brusuelas, Chief Economist at RSM, said the November CPI should be treated with exceptional caution.
In a blog post, he described the report as flawed and lacking the usual depth and reliability associated with Bureau of Labor Statistics data.
Brusuelas said the absence of October data makes it nearly impossible to determine whether inflation truly slowed or merely appeared to do so because of faulty assumptions.
Market reaction reflected this skepticism, with stocks edging only slightly higher and futures markets showing minimal movement.
Analysts said the muted response suggested investors were unconvinced by the apparent drop in inflation.
While the data appears to support recent interest rate cuts by the Federal Reserve, economists warned against drawing policy conclusions from distorted figures.
Swonk said the Fed is likely to approach the report cautiously, as it did with labour market data affected by the shutdown.
She added that inflation trends do not necessarily translate to affordability, particularly in housing.
Mortgage rates, insurance premiums, utilities and rising energy costs continue to strain households despite reported inflation cooling.
Brusuelas concluded that inflation data for November represents “noise rather than signal,” urging restraint in interpreting the numbers.
