NY Fed’s Williams: November CPI Probably Looked a Little Too Good

The original story by Yun Li for CNBC.

The November inflation report might’ve come in cooler than reality — and the New York Fed’s top guy is basically saying, “Don’t get too comfy yet.”

New York Federal Reserve President John Williams said Friday that “technical factors” likely dragged the November consumer price index down, thanks to the messy data situation caused by the government shutdown.

“There were some special factors … related to the fact that they weren’t able to collect data in October and not in the first half of November,” Williams said on CNBC’s Squawk Box.

And because of that, he said, parts of the CPI were “distorted,” probably lowering the overall reading by “a tenth or so.”

That matters because the delayed CPI report released Thursday showed inflation rising at a 2.7% annual rate in November — well below the 3.1% economists expected, according to a Dow Jones survey.

Williams suggested one reason the number may be biased lower is timing: most of the data was gathered in the back half of November, when discounting ramps up and sales are everywhere. He also flagged complications in categories like rent.

And the whole CPI release came with a big asterisk. Since the October CPI report was canceled, November’s report didn’t include some of the usual data points you’d normally see. The Bureau of Labor Statistics said it couldn’t go back and collect October survey data, and instead leaned on “nonsurvey data sources” to build the index.

That missing month is a big deal for economists trying to figure out whether inflation is truly sliding lower — or whether this was a one-off glitch. Some analysts think parts of the rent calculation (including the owners’ equivalent rent inputs tied to the missing October data) were effectively treated as flat, which may have pulled that piece of the CPI down artificially.

Williams said it’ll take another report to get clarity. December’s data, he noted, should give everyone a better sense of how big the distortion really was.

Still, he didn’t dismiss the report entirely. Williams said there’s comfort in the parts of inflation that weren’t tangled up in the shutdown-related issues — and he called the broader trend “pretty encouraging,” saying it looks like a continuation of the disinflation process already underway.