Trust these numbers？ Economists see a lot of flaws in delayed CPI report showing downward inflation

Thursday saw the release of a much lighter-than-expected consumer price report for November, breaking from the recent trend of sticky inflation.

Stocks jumped. Yields fell. Odds of a Federal Reserve rate increased.

And many economists scratched their heads.

The Bureau of Labor Statistics reported that the consumer price index had an annual inflation rate of 2.7% last month, while core CPI – a measure that excludes volatile food and energy prices – was even lower at 2.6%. Both were below than what economists had been estimating, as those polled by Dow Jones called for an annual headline rate of 3.1% and a rate on core CPI of 3%.

The November data release Thursday was delayed by 8 days because of the U.S. government shutdown, but more importantly, the October data was canceled, leaving it to the BLS to make certain methodological assumptions about the prior months' inflation levels.

Those assumptions in the methodology were not clear to economists and were not fully explained in the release.

“The downside surprise reflects weakness in both goods and services, but may be partly due to methodological issues. The BLS might have carried forward prices in some categories, effectively assuming 0% inflation,” Michael Gapen, chief U.S. economist at Morgan Stanley, said in a note, deeming the November reading as “noisy” in a way that's “difficult to draw strong conclusions.”

“If these technical factors are the main source of weakness, we could see reacceleration in December,” Gapen added.