In recent remarks, New York Federal Reserve President John Williams addressed the November inflation data, indicating that “technical factors” may have influenced the headline Consumer Price Index (CPI) reading, causing it to appear lower than expected. Speaking on CNBC’s “Squawk Box,” Williams explained that disruptions in data collection during October and early November contributed to this distortion.
“There were some special factors that really relate to the fact that data collection for October was incomplete,” Williams noted. He estimated that these issues could have led to a CPI reading that was artificially lowered by approximately one-tenth of a percentage point.
Williams pointed out that the recent CPI data, which showed an annualized rate increase of 2.7%, was below economists’ expectations of a 3.1% rise. Highlighting the challenges of interpreting this data, he remarked that the figures gathered mostly from the second half of November—when various sales promotions were in effect—might be skewed. He also cited complications in categorizing rent and other expenses as factors in the data distortion.
Despite these challenges, he expressed some optimism about the trends in certain categories, noting signs of cooling price pressures. “Some of the data we’re seeing is encouraging and reflects an ongoing disinflationary process,” Williams stated.
The report issued by the Bureau of Labor Statistics was particularly unique this month as it lacked several standard data points typically present in a CPI release, due to the cancellation of the October report. The Bureau explained that it could not retrieve data from October, relying instead on “nonsurvey data sources” to compile the index. This absence of October data has led economists to proceed with caution when interpreting November’s figures, particularly since there is no prior month for comparison.
Additionally, there are concerns that some elements used to calculate owners’ equivalent rent for the absent October month may have been inaccurately estimated as having zero inflation, further skewing the overall CPI figures.
Looking ahead, Williams anticipates that the December data will provide clearer insights into the inflation landscape and help determine the true impact of the technical issues encountered in the past months.
