The Daily Dish
December 19, 2025
The Great Disinflation, Sort Of
Inflation, and its more nebulous cousin “affordability,” have been the bane of the Trump Administration. As measured by the Consumer Price Index (CPI), inflation was 2.8 percent (measured year over year) at the start of the year and fell to 2.3 percent in April. But in the aftermath of Liberation Day, it rose to 3.0 percent in September.
And then the (inflation data) world went black.
When the funding impasse was broken and the government re-opened, the data machinery came back to life–yesterday the Bureau of Labor Statistics released the CPI report for November. Measured year over year, inflation was 2.7 percent, down from the 3.0 percent level in September. And core (non-food, non-energy) inflation fell to 2.6 percent from 3.0 percent in September. The White House rejoiced.
“Inflation continues to fall, wages continue to rise, and America is trending towards a historic economic boom.” White House press secretary Karoline Leavitt said in a statement. “Americans can expect this trend of lower prices and bigger paychecks to continue into the New Year!”
Uh, hold that thought. A closer look at the data raises some real questions. No data were collected in October, so it is not possible to see how much inflation changed from month to month. But it is possible to compute the average inflation rate that would have to prevail on average in October and November to get the same jump from September to November. The results of that calculation are:
|
All Items
|
-1.2%
|
|
Core
|
-0.7%
|
|
Food
|
-1.0%
|
|
Energy
|
-8.2%
|
|
Shelter
|
0.0%
|
|
FES
|
-1.3%
|
This makes it easier to see what is going on. The first thing is a sharp drop in energy prices that explains the difference between the disinflation of 1.2 percent in the top-line and the 0.7 percent in the core. This is real.
The second shocker is the report that there was no inflation in rents for a two-month period. This is unlikely to be real. Shelter is roughly one-third of the CPI, while the bundle of food, energy, and shelter (FES) is about one-half of the CPI. These estimates are just not plausible, especially the shelter data, and likely reflect the non-standard measurement period imposed by the shutdown/restart.
It will take until the next report, on December prices in January, to sort out the real trends. Until then, analysts will continue to look at the 3.0 percent level in September as the jumping-off point. From there, the upside risk is from tariffs, while the downside inflation risk comes from the clear declines in energy prices and the apparent – but unmeasured – boom in productivity growth. For the latter, we will find out a bit more when the delayed 3rd quarter data on gross domestic product are finally released.
The haze surrounding the state of the economy is lifting. But slowly.
