CPI cools in whacky report

December 18, 2025

The Bureau of Labor Statistics (BLS) was forced to scramble to gather data after the government shutdown ended on November 12. Many key data points were lost entirely, while others are incomplete due to a truncated November for data collection. We will not have a clean read of the data until December data, due out in January. Another shutdown cannot be ruled out. That means we should be cautious in how much weight we put on the data. The CPI data were already raising questions due to a surge in imputations after field offices were closed earlier this year.

The BLS allows up to 50% of prices to be imputed. That means using close substitutes or historic norms. Some prices are literally carried forward at the level they were in the previous months, which would zero out whether a given price was rising or falling. The technical notes suggest that much of the data for October were carried forward, Shelter costs, which represent nearly a third of the index were zeroed out in October. That does not look right.

The imputation in September CPI hit 40%, a record high. The imputation for November was not available as of the publication of this report. Collection did not begin until Friday, November 14. That could distort the seasonal adjustment. Brace for a hotter read of the data for December, as it will include the entire month. However, the assumptions for October will linger.

The consumer price index (CPI) rose 0.2% from September in November. That translates to a 2.7% gain from a year ago, which is cooler than the 3% we saw in September. The low for CPI in 2025 was 2.3% in April.

Food at home fell 0.2% over the two months, providing some relief at the grocery store. Fresh vegetables drove the slowdown in prices at the grocery store after escalating over the summer. Food away from home rose 0.5%, which is still cooler on a two-month basis than we saw in summer.

Separately, increased use of GLP-1 drugs has shifted what and where consumers spend. Demand for fresh fruits and vegetables has accelerated as demand for snack items has waned. More meals are being made at home instead of eating out, which has slowed the rise in prices for food away from homes.

Energy prices jumped 1.1% between the two months. Prices at the gas pump rose 0.9% from a year ago. Energy services rose 1.5% for the two months and added 7.4% compared to a year ago. That is boosting the cost of heating homes as we move into winter. Wages in the utility sector accelerated in November, bucking the overall trend. That is adding to costs along with the need to expand the energy grid.

The core CPI, which strips out food and energy prices, rose 0.2% after rounding. That was the smallest since June 2020. That translates to 2.6% from a year ago, the coolest reading since March 2021. Shelter costs, which have an outsize weight in the CPI relative to the Fed’s PCE measure, rose only 0.2% during the two months. That is the weakest since May 2020.

Rents cooled more than homeowners’ equivalent rents. Hotel room rates dropped by 1.3%, after rising over the summer. A drop in travel as flight cancelations multiplied in response to the government's shutdown likely exacerbated the weakness in hotel room rates, as well as airfares.

Goods prices excluding food and energy rose 0.1% for the two months, the weakest two month increase since May. Goods prices excluding food and energy were up 1.4%, a tick lower than September, but still elevated. Core goods prices fell during much of the 2010s. The buoyancy of goods prices is currently accounting for much of the overshoot in inflation relative to the Fed’s 2% target.

New and used vehicle prices moved higher. New prices edged up 0.3% for the two months, while used prices were up 1%. New vehicle prices were up only 0.6% from a year ago, used rose 3.6% from a year ago. New vehicle producers have absorbed the effects of tariffs, which have led to more layoffs than price hikes.

The producer price index, which measures profit margins, dropped at a double-digit pace in the vehicle sector in two of the last three months of data. It is not clear how much longer the vehicle producers can do that. Average vehicle prices crossed the psychologically important $50,000 mark in September, which is already driving more consumers into the used vehicle market.

The core services CPI, which strips out shelter costs, rose 2.7% from a year ago. That is the slowest year-over-year increase since the spring of 2021. Core services remained closer to 2% in 2019, prior to the pandemic.

Lower airfares and a drop in health insurance costs helped to hold service sector prices down. The BLS stopped reporting long-term care insurance due to “changes in the market for long-term care insurance that make it out  of scope and ineligible for pricing in the CPI.”

We know that regardless of whether Congress extends the ACA subsidies, healthcare insurance is poised to rise at its fastest pace in 15 years in 2026. That will show up in the data early next year. Childcare costs also cooled, which bucks all trends to date and points to another suspicious reading.