The impact of the 43-day government shutdown was evident in a surprisingly benign CPI release this morning as November consumer inflation came in well below forecasts. Because the Bureau of Labor Statistics (BLS) was shuttered in October, price data was never collected. As a result, this morning’s November report only included year-over-year change. The annual pace of headline CPI, expected to rise slightly in November, unexpectedly retreated from +3.0% in September to +2.7%, matching a five-month low. Core CPI performed a similar about-face, falling from +3.0% in September to +2.6%, the lowest since March 2021.

These curiously cool inflation measures were well below expectations. The lowest forecast of core CPI in a Bloomberg survey of 62 economists was +2.8%, 0.2 percentage points above the actual number.

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