The government shutdown has created a historic statistical void, and this puzzle-like CPI report, with each piece potentially leading the Federal Reserve and the market to different conclusions.
At 21:30 on December 19 (Thursday) in the UTC+8 time zone, the U.S. Bureau of Labor Statistics (BLS) will release the November Consumer Price Index (CPI) report.
Due to the government shutdown, this will be the first inflation data release since September. The report is complicated not only by the absence of October data but also faces quality concerns due to incomplete data collection.
1. Market Expectations and Core Concerns
● According to consensus forecasts from financial data company FactSet, economists generally expect the November CPI to rise 3.1% year-on-year, slightly above September's 3.0%. The core CPI, which excludes food and energy price fluctuations, is also expected to see a year-on-year increase of 3.1%.
● From a month-on-month perspective, since the official data will not provide changes compared to the previous month, economists estimate based on September levels, predicting an overall month-on-month CPI increase of 0.25% and a core CPI month-on-month increase of 0.3%.
● Christopher Hodge, Chief U.S. Economist at Crédit Agricole, stated that the market is more focused on month-on-month changes, as they better reveal short-term inflation trends, while year-on-year data signals are limited.
2. Bi-Monthly Data and Quality Doubts
● The absence of October data is a core challenge. The federal government shutdown interrupted the collection of price data, leading the BLS to cancel the October CPI release. An official spokesperson stated that the November press release and database will not include month-on-month percentage change data for a single month.
● Therefore, the November CPI report essentially reflects the cumulative price changes from September to November. The Richmond Fed noted in an analysis that this is an unprecedented situation; it is the first time since January 1921 that the monthly CPI data series has experienced such an interruption.
● Data quality issues are also prominent. Goldman Sachs economists pointed out that since the shutdown did not end until November 13, combined with the Thanksgiving holiday, the time available for collecting price data that month was significantly shortened, and the number of samples collected may be less than usual.
● As many commodity prices typically decline at the start of the holiday promotional season in mid-November, the concentration of price collection in the latter half of the month may introduce a downward bias to the data.
3. Major Forces Driving Inflation
● Tariffs are widely regarded as a key factor driving up goods inflation. An analysis by the Economic Policy Institute predicts that since September, prices for goods such as automobiles, appliances, and clothing have continued to rise under the influence of tariffs.
● Housing costs may show a divergent trend. The inflation rate for primary residential rents and owners' equivalent rent has already shown signs of slowing in September. Although rents may rebound in November, Interactive Brokers economist José Torres believes that high mortgage rates and tightening immigration policies will continue to limit a strong rebound in housing costs.
● Additionally, food inflation may remain elevated. In September, wholesale food prices (especially beef and turkey) saw significant jumps.
● In terms of energy and insurance, due to seasonal adjustments, gasoline prices may show an increase in the report, while car insurance prices are expected to record another substantial rise.
4. The Fed's Dilemma and Market Outlook
● The inflation outlook is crucial for the Federal Reserve's monetary policy. The current market forecast of a 3.1% inflation rate is still more than a percentage point above the Fed's 2% long-term target.
● The latest survey from the New York Fed shows that U.S. households' median inflation expectations for the next year remain at 3.2%, with expectations for the next three and five years stable at 3%.
● Some economists believe that if tariff levels do not increase further, their impact on inflation should be viewed as a one-time effect, and future inflation may trend back down. For example, Torres predicts that by the summer of 2026, inflation may stabilize around 2.5%.
5. How to Interpret This "Non-Standard" Report?
Given the report's uniqueness, several institutions advise investors to remain cautious.
● UBS economists believe that the market should "pay almost no attention" to the upcoming November CPI data, as its informational basis is weaker than in regular months and relies on not fully disclosed technical assumptions.
They argue that the data bias caused by the government shutdown may not be fully eliminated until the release of the April CPI report in May 2026.
● Therefore, a more reasonable approach is to combine the inflation data for November and December as a reference for assessing the inflation trend in the fourth quarter. At the same time, closer attention should be paid to the Personal Consumption Expenditures (PCE) Price Index, which the Fed values more, as it is not affected by changes in the calculation of health insurance in the CPI.
The historical statistical series has been unexpectedly interrupted by the government shutdown, and tonight's data will be a "bi-monthly puzzle." Although analysts attempt to depict the "ghost image" of October inflation from high-frequency data and model extrapolations, the true outline has already become blurred.
Signals beyond the data are more worthy of attention: under the triple pressure of price stickiness, tariff pressures, and stubborn household inflation expectations, the Federal Reserve's path to a 2% target rate seems to be longer than a rugged mountain road lacking signposts.
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