Why inflation data won't include prices from these cities in Utah, Nebraska and New York

The Bureau of Labor Statistics has reduced price checks used to calculate the Consumer Price Index (CPI) due to staffing shortages stemming from a federal hiring freeze, suspending data gathering in cities like Lincoln, NE and Provo, UT. Economists warn these cutbacks could impact the accuracy of cost-of-living reports and potentially increase volatility in regional data, particularly as the Federal Reserve and other government entities rely on CPI for key decisions; some economists believe this is the "worst possible time" for these cuts.

Analysis

The U.S. Bureau of Labor Statistics (BLS) is curtailing its price-checking operations, fundamental to the calculation of the Consumer Price Index (CPI), due to persistent staffing shortages attributed to a federal government hiring freeze initiated under the Trump administration, which has seen the overall federal workforce reduced by 26,000 since January. This operational scale-back has led to the suspension of data gathering in Lincoln, Nebraska, and Provo, Utah, since April, and in Buffalo, New York, this month. While the BLS anticipates a "minimal impact" on the national inflation rate, it concedes that these reductions could introduce greater volatility in regional cost-of-living reports and specific item price data. Economists, including Ernie Tedeschi of the Yale Budget Lab and Omair Sharif of Inflation Insights, express significant concern, highlighting that these cutbacks arrive at a precarious moment when inflation is being closely monitored for potential impacts from tariffs. Tedeschi described it as the "worst possible time" for such cuts, emphasizing that inaccuracies could lead to CPI figures being either too high or too low, both detrimental. Sharif noted that for the April inflation report, the government resorted to more "educated guesses" using similar items' prices. The compromised integrity of CPI data carries broad implications, as these figures are pivotal for Federal Reserve interest rate policies, which influence borrowing costs, and for adjusting government programs like Social Security, potentially degrading future economic outcomes.

Key Decisions for Investors

• Investors should exercise increased caution when interpreting headline CPI figures, recognizing the potential for reduced accuracy and heightened regional volatility due to data collection cutbacks.
• Consider supplementing CPI data with a broader array of economic indicators and qualitative assessments to gauge inflationary pressures and inform investment strategies, particularly those sensitive to interest rate movements.
• Anticipate potentially increased uncertainty in Federal Reserve policy outlooks, as degraded CPI data quality could complicate monetary policy decisions and contribute to market fluctuations.