December inflation data will be 'extremely muddy' economists warn

Core Insights - The upcoming December consumer price index (CPI) is expected to show inflation remaining above the Federal Reserve's 2% target due to data collection disruptions from the government shutdown [1] - The consensus forecast estimates a monthly increase of 0.3% in headline inflation and a year-over-year increase of 2.6%, while core inflation is projected to rise 0.26% monthly and 2.6% annually [2] - Economists warn that the 43-day government shutdown will affect not only the December CPI but also the inflation data for the following months [2] Data Collection Issues - The government shutdown has led to significant data collection issues, impacting the accuracy of the CPI reports for October and November [3][6] - The Bureau of Labor Statistics (BLS) used a carry-forward methodology, which assumed no price changes during the month, resulting in a downward bias in inflation dynamics [6] - The carry-forward methodology particularly affected housing price data, implying no changes in housing gauges from April to October [7] Impact on Inflation Reporting - The timing of data collection for November coincided with holiday discounting, which may have further depressed the November CPI data [8] - The downward bias in inflation data is expected to persist through April, with some offset anticipated, but the timing of this correction remains uncertain [11] - Oxford Economics forecasts similar monthly increases of 0.3% for both headline and core CPI in December, while noting that shutdown-related distortions will cloud the December CPI signals [11][12]