November’s inflation report is the first to be released after the shutdown

Wall Street is eagerly anticipating the release of the November consumer price index report on Thursday. This will be the first reading since the end of the record-setting U.S. government shutdown last month. Economists are predicting that the report will show a 12-month inflation rate of 3.1%, with the core CPI (excluding food and energy) expected to be at 3.0%.

The Bureau of Labor Statistics has announced that the November report will not include 1-month percent changes for October, as the October data was missing due to the shutdown. The September CPI data showed an annual rate of 3.0% for both headline and core measures, which was the only economic data released during the shutdown.

José Torres, a senior economist at Interactive Brokers, believes that the psychological impact of the inflation rate hitting the 3% threshold will be significant. While the consensus estimate is at 3%, Torres predicts that the actual readings could be slightly lower at 2.9%. He sees a range of possible outcomes for the headline rate, with a number between 2.9% and 3.1%.

A lower-than-expected inflation rate of 2.9% could provide positive momentum for stocks heading into the new year. Torres suggests that this number could pave the way for a “Santa Claus rally” and impact the interest rate outlook for the following year, as the Fed is projecting a rate cut.

However, not everyone believes that a small move in the inflation rate will lead to significant market reactions. Victoria Fernandez of Crossmark Global Investments points out that other factors, such as the absence of month-over-month data and the timing of data collection, could impact the overall interpretation of the CPI report. She believes that Fed policymakers would still be cautious even with a 2.9% reading.

The government shutdown delayed the release of the November CPI report, as data collection only began in the latter half of the month. Fernandez questions whether this could introduce bias into the data and affect the overall assessment of inflation trends. Despite conflicting economic indicators, she believes that inflation remains high and is not trending back towards 2%.

Investors are also awaiting the delayed PCE reports for October and November, as well as the postponed October producer price index figures. The uncertainty surrounding economic data highlights the need for more information before making long-term projections.

In conclusion, the upcoming CPI report will provide valuable insights into inflation trends post-shutdown and could have implications for stock market performance and interest rate decisions in the coming year. Stay tuned for the release of the report on Thursday to see how it will impact the financial markets.