NY Fed President Williams says some ‘technical factors’ distorted November’s CPI reading downward
According to New York Federal Reserve President John Williams, “technical factors” likely distorted November’s inflation data, pushing the headline reading lower than it otherwise would have been.
Williams explained that there were special factors or practical factors related to the fact that data collection was affected in October and the first half of November.
He added that because of this, the data were distorted in some categories, and that pushed down the CPI reading, probably by a tenth or so.
Impact on Consumer Price Index
The consumer price index rose at a 2.7% annualized rate last month, a delayed report from the Bureau of Labor Statistics showed.
Economists polled by Dow Jones expected the CPI to have risen 3.1%, indicating a downward bias in the data.
Williams noted that the data may have been distorted due to complications with rent and other categories.
Encouraging Signs
Despite the distortion, Williams took some comfort from categories not affected by those issues, seeing cooling price pressures in certain sectors.
He stated that some data was actually pretty encouraging, representing a continuation of the disinflationary process.
Williams emphasized the need to wait for December data to get a better reading of how much the distortion affected the CPI reading.
Complications with Data Collection
Because the October CPI release was canceled, Thursday’s report lacked several standard data points typically included in a CPI report.
The Bureau of Labor Statistics said it could not go back and collect October survey data, though it relied on nonsurvey data sources to construct the index.
Economists may be cautious about interpreting the report as clear evidence that inflation is on a sustained downward path, given the absence of an October comparison.
Estimated Inflation in October
Economists believe some inputs to the owners’ equivalent rent calculation for the canceled October month were estimated by the BLS to have zero inflation, distorting that calculation downward.
This distortion may have contributed to the downward bias in the CPI reading.
Williams emphasized the need to wait for more data to understand the full impact of these technical factors.
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