Inflation falls to 2.7% as slower housing and food increases offset a surge in electricity

Inflation in November fell to 2.7%, the Bureau of Labor Statistics said Thursday, a positive sign for consumers on its face.

However, November’s data was collected later than normal. The released figures may include significant holiday discounting, which could have put downward pressure on the overall figure.

"It’s possible that this does reflect a genuine drop-off in inflationary pressures," said Paul Ashworth, Capital Economics' chief North America economist.

"But such a sudden stop, particularly in the more persistent services components like rent or shelter, is very unusual, at least outside of a recession," he said.

Morgan Stanley's economists concurred, saying it's "difficult to draw strong conclusions" from the report. They warned that given the way the BLS processed the report without October data, inflation "could see reacceleration in December."

Thursday’s release, known as the Consumer Price Index, or CPI, was the first batch of inflation data to be published since the historically long government shutdown ended in mid-November.

The change for the two months of October and November, a figure the BLS typically doesn’t release, was 0.2%. The BLS’ statisticians were likely to have had to make a number of adjustments to generate many of the figures throughout Thursday’s announcement.

Some of the most significant easing in prices happened in the categories of food and what BLS calls "shelter," which includes both rent and mortgages.

In September, prices in the food category were rising at a 3.1% annual rate. In Tuesday’s release, that slowed to 2.6%.

Housing was increasing at an annual rate of 3.6% in September. In November, that slowed to 3.0%.

Energy prices, however, have soared 4.2% over the last 12 months.

“The index for electricity increased 6.9% over the last 12 months,” the BLS said.

Americans consistently report that inflation and everyday costs are the most pressing economic issues they face: 44% of adults chose “inflation and the rising cost of living” as their top concern in an NBC Decision Desk poll released Sunday.

The data could also be a green light for the Fed to continue interest rate cuts. Stocks initially started the day sharply higher but closed the trading session well off the day's highs. The S&P 500 ended up 0.8%, and the Nasdaq Composite closed up 1.4%. The 30-stock Dow Jones Industrial Average finished the day up just 66 points or 0.14%.

Some experts expressed early skepticism of November’s inflation data. JPMorgan analysts said last week in a note that they expected the data to be “more uncertain” and “incomplete” because the BLS was unable to collect most of the data for October.

Federal Reserve Chair Jerome Powell said the central bank would need to look at the latest data with a “somewhat skeptical eye” because of the abnormal way the data was collected.

December’s inflation data is expected to come out in mid-January. The next batch of data is likely to give a fuller picture of changing prices, because the data will have been collected normally.

During the 43-day shutdown, BLS employees did not collect all the data they needed to determine how prices had changed over October. The BLS later confirmed it would not release an October inflation report.

September’s inflation data, released during the shutdown, showed that inflation rose to 3% that month, a slight increase from August’s rate of 2.9%. Prices for housing, airline tickets, recreation, household furnishings and apparel all increased measurably.

Despite the October data gap, the Federal Reserve announced last week that it would cut borrowing costs by a quarter of a percentage point. Behind the decision were concerns about the labor market, which has shown signs of weakening in recent weeks.

On Tuesday, the BLS released new data showing job cuts jumped in October, pushing the unemployment rate up to 4.6% last month.