How the 2023 Government Shutdown Could Skew October Inflation Data
Last year's federal shutdown created statistical gaps that may distort how October's inflation figures are calculated and interpreted.
The residual effects of the government shutdown that occurred in late 2023 are poised to complicate the interpretation of October's inflation report, raising methodological questions for economists and policymakers who rely on the data to guide decisions.
When federal agencies are forced to halt operations during a shutdown, the collection of key economic statistics is disrupted. Price surveys, consumer spending records, and other inputs that feed into inflation calculations can be delayed, incomplete, or subject to revision, leaving statisticians to fill gaps through estimation — a process that can introduce noise into the final numbers.
Read more Fed's Goolsbee Flags October Inflation Data as 'Borderline Disturbing' →
The downstream consequence is a base-effect distortion. Because inflation is measured as a year-over-year percentage change, any anomalies embedded in last year's data become embedded in this year's comparisons. If October 2023 figures were artificially suppressed or inflated due to shutdown-related data gaps, the October 2024 reading will reflect that distortion whether or not underlying price pressures have actually shifted.
For the Federal Reserve, which has been navigating a delicate path between controlling inflation and avoiding unnecessary economic harm, such statistical noise arrives at a particularly sensitive moment. Policymakers have signaled they are watching incoming data closely as they evaluate the pace of potential interest rate adjustments, making data quality an unusually high-stakes concern.
Analysts caution that a single month's inflation print should never be read in isolation, but the shutdown-linked distortions add an additional layer of caution to that standard advice. Continue reading at NYT > Business.
