Inflation cooled in November to 2.7%, but economists say to take it with ‘the entire salt shaker’

By Alicia Wallace, CNN

(CNN) — Inflation unexpectedly – and sharply – slowed in November, a seemingly welcome change for Americans weighed down by the persistently high cost of living.

However, economists were quick to caution Thursday that the Consumer Price Index slowing to 2.7% from 3% in September was likely the result of shutdown-related distortions of economic data.

“It’s hard to read too much into the November inflation data. The shutdown clearly had a big impact on data collection,” Heather Long, chief economist at Navy Federal Credit Union, wrote in a note on Thursday. “Inflation did not suddenly improve a lot between September and November. Anyone who has been to the grocery store or paid a utility bill knows this.”

The November CPI report, published Thursday by the Bureau of Labor Statistics, is the latest in a long line of backlogged government economic data to be released following the 43-day lapse in federal funding.

And, like other recent reports, it bears scars and plenty of potential asterisks from the historically long shutdown that spanned October 1 through November 12.

The October inflation number was not calculated at all, after the government shutdown hampered statistical agencies’ ability to process economic data. And collection efforts for November started late as well.

The CPI, which measures the average change in prices for a large basket of goods and services, is the most widely used inflation gauge.

And the index has only heightened in importance as policymakers, businesses and Americans look to gauge how prices are faring at a time when a raft of high tariffs has been implemented, the labor market is on increasingly shaky ground, and households are buckling under the weight of yearslong high prices.

However, Thursday’s data raised more eyebrows and questions than it did answers.

“I don’t take it at face value,” Stephanie Roth, chief economist at Wolfe Research, told CNN. “It seems like the government shutdown had a big impact.”

Or, as Wells Fargo economists quipped: “Take it with the entire salt shaker.”

Missing data

Thursday’s report includes limited data for October, a month when BLS workers were furloughed and most prices could not be gathered (two-thirds of the CPI prices are collected in person).

BLS officials detailed the shutdown’s impact on the CPI in a separate notice released Thursday. The November collection started late on November 14 (the shutdown ended November 12); however, the agency said it authorized additional hours in an attempt to fully collect data for last month.

Because October data was missing, monthly changes in inflation could not be calculated for the majority of the categories that make up the CPI.

“That was one flawed report,” Joe Brusuelas, RSM US’ chief economist, told CNN, noting that the underlying data was not well aligned with the top line. “Due to the government shutdown, the BLS did not have the resources or the time to conduct a complete report.”

For example, Brusuelas said that price changes for rents and owners’ equivalent rent (an estimation of the rental value of owner-occupied homes) were in the vicinity of zero during the month.

“That just doesn’t look or feel right,” he said. “That just doesn’t pass the smell test.”

Brace for a December rebound

On a two-month basis, consumer prices rose 0.2% from September to November, resulting in an average rate of 0.1%. In September, prices rose 0.3% on a monthly basis.

Economists were expecting prices to climb at a 0.3% monthly rate in November, leaving the annual rate of inflation unchanged at 3%, according to FactSet consensus estimates.

Thursday’s report showed that a closely watched measure of underlying inflation cooled as well.

Excluding food and energy, categories where prices tend to be quite volatile, the core CPI index rose 0.2% from September to November (0.1% averaged on a monthly basis).

As a result, the annual rate sharply slowed, dropping from 3% in September to 2.6%, the lowest annual rate since March 2021 – before the historic bout of high inflation.

The White House on Thursday celebrated the report.

“Just as President Trump told Americans last night: inflation continues to fall, wages continue to rise, and America is trending towards a historic economic boom,” White House press secretary Karoline Leavitt told CNN in a statement.

Inflation is slowing, but not this much, Wells Fargo economists noted Thursday.

“CPI data are not revised, and as a result we believe the data will be noisy for at least another month or two,” economists Sarah House, Michael Pugliese and Nicole Cervi wrote in a note to investors on Thursday. “A bounce back in prices in the December CPI report to be released on January 13 is probably coming.”

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CNN’s Matt Egan contributed reporting.