US Consumer Price Revisions, Expert opinions on the implications on the overall inflation trend
In a recent development, the U.S. monthly consumer prices experienced a slight upward revision in December, but the overall inflation adjustments were mixed, failing to alter the expectations regarding the Federal Reserve’s anticipated interest rate cut this year.
The annual revisions released by the Labor Department revealed a slight increase in the consumer price index for October and November, compared to the earlier reported figures. However, the prices excluding the volatile food and energy components remained unchanged from October through December. As a result, the revisions did not significantly impact the trajectory of inflation, which appears to be moderating after a surge in 2022.
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The revised CPI data had been eagerly anticipated by financial markets and economists, following remarks from Federal Reserve Governor Christopher Waller, who had highlighted them as crucial data points for policymakers to assess progress in their fight against inflation.
Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin, commented on the revisions, stating, “The revisions were much ado about nothing. This is becoming a trend where a Fed official mentions a data release once and then everyone waits with bated breath only to find out that it’s a bunch of noise.”
The updated CPI data showed a 0.2% rise in December, as opposed to the previously reported 0.3%. The November data was also revised upward to reflect a 0.2% increase, rather than the previously estimated 0.1%. The 3-month annualized increase in the CPI was adjusted to a 1.9% rate from a 1.8% pace.
The revisions were attributed to the recalculation of seasonal adjustment factors, a routine procedure undertaken by the Bureau of Labor Statistics (BLS) to remove seasonal fluctuations from the data. This process covered data from January 2019 through December 2023, and while the year-on-year data, which is not seasonally adjusted, remained unchanged.
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The core CPI, which excludes food and energy, also saw revisions, with the December increase adjusted to 0.275%, down from the previously reported 0.3%. The 3-month increase in the core CPI inflation rate was unchanged at 3.3%.
The revisions showed that core goods prices fell in the first half, but not as steeply as previously estimated, while the increase in the cost of services was revised down for November and December.
