December consumer prices rose from the month before and did not fall as previously thought, according to revised data from the Bureau of Labor Statistics released Friday.
The newly calibrated Consumer Price Index shows that prices rose 0.1% on a seasonally adjusted basis in December from November versus a previously estimated decline of 0.1%.
Every year, the BLS recalculates seasonal adjustment factors for CPI going back five years. (However, the year-over-year data, which is not seasonally adjusted, is not revised.)
The latest annual adjustments show slight shifts in the month-on-month inflation trend for 2022 — with November and October revised up by 0.1 percentage points.
Core CPI, which excludes the more volatile categories of food and energy, saw upward revisions of 0.1 percentage points in December and November to 0.4% and 0.3%, respectively.
“Whether you’re talking about inflation, labor markets, GDP, these things all go through seasonal adjustment procedures and do get revised over time,” said Andrew Patterson, senior economist in Vanguard’s investment strategy group.
“There’s not usually a whole lot of focus on it, but given the magnitude of inflation and the volatility of macro fundamentals these days, it’s probably gotten a little bit more attention than typical,” he added.
The latest BLS tweaks show the importance of not reading into any one data point but instead reviewing a variety of different metrics over a longer-term period, he said, a point that has been repeatedly stressed by officials such as Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen as they measure the path of inflation.
But the revisions don’t change the overall storyline, Patterson noted.
“We continue to believe that inflation is going to grind down over the course of the year,” he said.
The annual revisions also come just days before the release of the January CPI report, which will debut some modifications of its own: changing its weighting methodology from consumption patterns collected every two years to a single year of spending data.
“This means that this 2023 CPI report will be based on consumer spending patterns that took place in 2021, as opposed to 2022’s CPI data, which was based on spending data over 2019-2020,” William Blair analyst Richard de Chazal wrote in a note Friday. “From the BLS’s perspective, this makes the data more timely and relevant, and a better reflection of actual spending patterns.”
The adjustments could help better gauge economic activity during what’s been a very unpredictable time, noted Diane Swonk, KPMG chief economist, in a Twitter thread this week.
“The U.S. statistical agencies work extremely hard to measure and seasonally adjust the data accurately to reflect what where once considered normal season variations — everything from the surge in extreme weather events we are enduring to the unusual dynamics of an economy that is still emerging from a pandemic have distorted normal seasonal patterns,” she wrote.
“Those shifts, coupled with the rapid pace at which the economy is currently shifting has made measuring current economic conditions more difficult. It is hard to tell where we are, let alone where the economy is headed,” she said.
Here’s how the adjusted data looks for 2022:
Month: Original data vs. Revised
January: 0.6% vs. 0.6%
February: 0.8% vs. 0.7%
March: 1.2% vs. 1%
April: 0.3% vs. 0.4%
May: 1% vs. 0.9%
June: 1.3% vs. 1.2%
July: 0.1% vs. 0%
August: 0.1% vs. 0.2%
September: 0.4% vs. 0.4%
October: 0.4% vs. 0.5%
November: 0.1% vs. 0.2%
December: -0.1% vs. 0.1%