The Consumer Price Index (CPI) is set to be released at 8:30 a.m. ET on Tuesday, bringing with it significant attention and uncertainty. This release comes just 11 days after former President Trump’s unprecedented firing of the head of the Bureau of Labor Statistics (BLS). This event has led to much deserved skepticism regarding the accuracy and reliability of the data.
Analysts predict that the Consumer Price Index (CPI) rises another 0.2% this month. They even forecast it eventually reaching an annual rate of 2.8%, based on consensus estimates by FactSet. This anticipated increase follows a lackluster jobs report that included substantial revisions to previous months’ employment data, further compounding concerns about the economic landscape.
Joe Brusuelas, chief economist at RSM US, recently explained what’s at stake with next week’s CPI report. He added, “It’s certainly dumbing down the quality of the inflation data.” Brusuelas anticipates that the CPI data will reveal “further evidence of tariff-induced inflation eroding the purchasing power of consumer paychecks.”
The BLS has already struggled to collect information with recent cutbacks. Based on their statements, it appears the agency suspended data collection in at least three metro areas—Buffalo, New York, Lincoln, Nebraska, and Provo, Utah—since this past April. This suspension affects the Commodity and Services Pricing survey as well as the Housing survey. Because of that, there will be a one-time decrease in the number of prices and rents imputed used to compute the CPI.
“Collection suspension affects both the Commodity and Services Pricing survey and the Housing survey.” – BLS
Consequently, analysts warn that future CPI numbers will be less accurate. To do that, BLS relies on an imputation process to estimate and model prices. For this purpose, they use approaches that go further than straight local observations. This shift has raised concerns about the reliability of the data, with Brusuelas noting, “There’s going to be a larger margin of error with an expectation of rolling revisions to the CPI data in a way that is somewhat similar to what we see in the jobs data and the durable goods data.”
The effect of tariffs on prices remains a big theme too. Since in June the Consumer Price Index indexed rocketed up by 2.7%. That’s its highest point in four months, largely due to tariff-induced costs taking effect. Brusuelas suggests that July CPI will start to reflect inflation for more goods and services. According to him, tariffs are behind this massive increase.
Given all of these changes, the upcoming CPI release is sure to be closely watched. Analysts worry that all the changes and recalculations are making it hard to see what’s really going on with inflation.
“It’s going to bore us to sleep watching the back revisions in the CPI and [Personal Consumption Expenditures] data.” – Joe Brusuelas
The BLS’s heavy reliance on imputation for collecting its data has come under fire in a recent study covering a 77 month study period. That analysis showed that in 1 of every 5 months analyzed, yearly inflation numbers came in more than a tenth of a percentage point higher than expected. On the flip side, 14% of the months had downward inflation surprises. These results are a powerful example of how changes in data collection can have a huge impact on reported inflation.
With uncertainties surrounding data collection and revisions, many are left questioning how accurately this CPI report will reflect current economic conditions.