Cogito Ergo Non Serviam
Suspect Data Shows Drop in November Inflation
The US government released data showing that the Consumer Price Index, a trailing inflation indicator, may have declined in November to 2.7%. This is lower than the 3.1% many economists expected, but it is also above the 2.0% target of the Federal Reserve. It is also a suspect figure. The government shut-down earlier this autumn badly impeded the collection of data. It seems plausible and prudent to average the data from today with data that will come out for December. Things may still be a bit off, but the questionable data will be diluted so as to make the overall picture closer to being accurate.
The White House is taking this opportunity to pump up its record. "This report is clear: prices are steady and wages are beating inflation," the White House Council of Economic Advisers said in a series of social media posts, which pointed to groceries, airfares and hotels as some of the areas of improvement.
The report is more opaque than the council argues. Wages are only beating inflation for the top 10% of workers. The lower deciles are actually losing ground with negative real wage growth (which for those who do not speak Economist, is real wage shrinkage.) Prices are not steady unless one looks across the entire economy. Eggs are down 13.2% from last November while gasoline prices rose in November after falling in October. Gas prices are up 0.9 percent over the past year. New car prices were up 0.2 percent from October and 0.6 percent over the past year. Beef is up more than 14% year-over-year.
Ben Casselman of the New York Times wrote,
Paul Ashworth, chief North America economist for Oxford Economics, was particularly incredulous about the numbers, especially the muted increase in housing costs. "It's possible that this does reflect a genuine drop off in inflationary pressures, but such a sudden stop, particularly in the more-persistent services components like rent of shelter is very unusual, at least outside of a recession," he wrote in a note.
"The truncated information-gathering process given the shutdown could have caused systematic biases in the data," wrote Kay Haigh, global co-head of fixed income at Goldman Sachs Asset Management.
The positive CPI report "comes with an asterisk," wrote Art Hogan, B. Riley Wealth chief market strategist. Hogan noted that the report reflected "the black Friday phenomenon that seems to have grown into the entire month of November."
The worry that the Fed and Wall Street should have right now, but seem not to take seriously, is the idea that a recession is ahead. Disinflation (when prices continue to rise but more slowly than before, which is the current situation) can turn into deflation (a precursor to recession or depression). The Fed is cutting rates to boost job prospects, but hiring is slow. Next year could see a recession or an explosion of inflation. The current data give no clue as to which will or will not happen.
Wall Street needed an excuse for a Santa rally, a surge in prices ahead of the end of the year, and this is it. Inflation is down, so stocks rise. The trouble is that in three weeks or so, the data for December will be out, and all of this optimism could be squashed.
If the president and Congress really wanted to help the Fed, they would raise taxes to cut the budget deficit and get the national debt under control (this would be deflationary). Then, they would get the housing and healthcare markets back on a more sustainable footing. They will not, and as a result, the country will have more trouble righting the ship than is really necessary.
The decline under the Trump administration continues to accelerate.
© Copyright 2025 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Ubuntu Linux.
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