Economists warn of missing data as they urge caution on better-than-expected inflation report

Inflation unexpectedly fell to 2.7% in November, according to the just-released report from the Bureau of Labor Statistics, but economists, while cheering the drop from 3%, also are warning that data is missing from the calculation due to the shutdown. Experts had forecasted a rise to 3.1%.

Navy Federal chief economist Heather Long noted that 2.7% is the “lowest since July,” while warning that the number was impacted by the shutdown.

“There is almost no October inflation data due to the shutdown and some impact on November data collection as well.”

“So much is missing…” she wrote, offering this visual.

“We always want to see inflation numbers that are down,” Claudia Sahm, a former Federal Reserve Board economist, told Yahoo Finance. “So, you know, downsides surprises are better than upside surprises.”

But she stressed, “I think it is extremely important to take this release with a big grain of salt.”

Pointing to the federal government shutdown, Sahm warned that the data collection “was really disrupted by having a month off in October. And so I think we’re just gonna have to see more data next Monday before we really start running with this lower number.”

Goldman Sachs’ Lindsay Rosner went even further.

“I think it may even be more than a grain” of salt, Rosner said. “I think it may be an entire bag.”

Rosner, as have others, stressed that due to the shutdown, numbers for prices collected were largely for the end of November — which included Black Friday sales.

“One thing I’d point out in particular, that I think will really resonate with the listeners, is that the sampling for November, specifically, was focused around the timing of Black Friday,” she said. “We all know how good the sales were. And so when you look at those numbers, yes, it’s gonna look like prices were lower, so this soft optic number of inflation seemingly lower, while we really would like to get excited about it — I don’t think it’s deserving of excitement.”

Professor of Economics Justin Wolfers, a frequent cable news guest, summed it up:

“1. It looks like the labor market has frozen 2. It looks like inflation is cooling,” he wrote. “We can’t be sure of either trend given shutdown-related distortions to data collection. But… it surely pushes the Fed toward cutting rates again.”