- A new Labor Department report finds inflation slowed more than expected in November.
- Economists say the government shutdown likely skewed the data.
- Energy and food were among the categories with the biggest price increases last month.
A new federal inflation report released Thursday, delayed by the recent government shutdown, finds U.S. inflation inched down to 2.7% in November, coming in well below expectations.
But the data is based on incomplete information and might, according to some economists, be undershooting the actual pace at which prices on consumer goods and services escalated last month.
Economists surveyed ahead of Thursday’s report had predicted headline inflation of 3.1% for the month and a core inflation rate of 3%.
The Labor Department’s Consumer Price Index report shows inflation moved up 0.2% from September to November but on an annual basis, the price increase measure was down from September’s 3% rate. Core inflation, which strips out volatile food and energy prices, came in at a 2.6% annual rate in November, down from 3% in September.
Regional inflation for the Mountain West group of states, which includes Utah, came in slightly lower than the national average in November at 2.6%.
Energy prices were up 4.2% in November over the same time last year, while groceries moved up 1.9% and the cost of dining out is up 3.7% on an annual basis. Housing related costs increased 3% over the past 12 months and used cars and trucks are selling, on average, for 3.6% more than in November 2024.
In a separate notice released Thursday, the Labor Department explained that it was unable to collect October survey data, used to compile the inflation report, due to the shutdown which ended Nov. 12. That also limited November data collection to the last two weeks of the month and the department noted it included information from nonsurvey sources to complete its report.
Numerous economists, including Heather Long, chief economist at Navy Federal Credit Union, questioned the veracity of the November report, noting the incomplete data collection process likely skewed inflation measures.
“It’s hard to read too much into the November inflation data,” Long wrote in a Thursday note, according to a report from CNN. “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.”
Kay Haigh, global co-head of fixed income and liquidity solutions at Goldman Sachs Asset Management, warned that the November numbers were “noisy.”
“The canceling of the October report makes month-on-month comparisons impossible, for example, while the truncated information-gathering process given the shutdown could have caused systematic biases in the data,” Haigh told the Associated Press.
How will the Fed view Thursday’s inflation report?
How the qualified inflation data will be viewed by the Federal Reserve remains to be seen. The December CPI inflation report is due ahead of the U.S. central bank’s next policy meeting in January. The monetary body will also see a slew of other data before then, including another inflation reading via the Personal Consumption Expenditures inflation index, the Fed’s preferred metric.
At its final meeting of 2025 last week, the Fed implemented a third straight .25% cut to its benchmark federal funds rate, bringing the interest range down to 3.5% to 3.75%, the lowest in three years.
With both sides of the monetary body’s dual mandate of maximum employment and price stability under threat amid current economic conditions, the 12-member committee split along differing views of the most critical issue to address, voting 9-3 in favor of the cut. Among the three no votes, Austan Goolsbee and Jeffrey Schmid favored no cut at all, while Stephen Miran, wanted a 0.5% reduction to the benchmark rate.
Generally speaking, rate reductions help spur economic activity by reducing the cost of debt which can promote business activities like investment and hiring. Rate hikes, which increase the cost of consumer and commercial debt, quell spending and help slow down inflationary price increases.
Last week’s rate change reflects the Fed’s decision to prioritize the labor side of its two-part mandate and chairman Jerome Powell pointed to the policy dilemma facing committee members in comments to reporters following the meeting.
“You have one tool,” Powell said. “You can’t do two things at once.”
During comments to reporters last week, Powell underscored that while the decision to cut rates is aiming to address a lagging labor market, the Fed is not ignoring inflation concerns.
“We are going to need to have some years where real compensation is higher … for people to start feeling good about the affordability issue,” Powell said. “So, we are working hard on that. We are trying to keep inflation under control, but also support the labor market and strong wages, so that people are earning enough money, and feeling economically healthy again.”