Trump’s Firing of BLS Statistician Raises Concerns Over Accuracy and Volatility of Upcoming Inflation Data Due to Reduced Collection and Imputation Methods
The upcoming Consumer Price Index (CPI) data, scheduled for release at 8:30 a.m. ET on Tuesday, carries significant weight due to the anticipated influence of President Trump’s tariffs. However, following the unexpected termination of the Bureau of Labor Statistics (BLS) top statistician, this release now comes with additional uncertainty.
The forthcoming CPI data may be subject to more revisions than usual, partially due to budget and staffing cuts within the Trump administration. Joe Brusuelas, chief economist at RSM US, told CNN that there will likely be a larger margin of error with an expectation of rolling revisions to the CPI data, reminiscent of the adjustments seen in employment and durable goods data.
The BLS, affected by budget cuts and staffing reductions under the Department of Government Efficiency, has scaled back on data collection feeding into the critical pricing gauge. Since April, the agency has stopped collecting data in three metropolitan areas (Buffalo, New York; Lincoln, Nebraska; and Provo, Utah) and has relied more heavily on an imputation process for price comparisons.
These cuts have had a “minimal” impact on the overall index but increased volatility in geographic or item-specific price indices, according to BLS. However, the agency did not provide statistical analysis of these wider cuts nor sufficient information for others to estimate their potential impact. Alan Detmeister, a senior economist at UBS, stated that these broader cuts represent four times more observations than those dropped from the three cities and may contribute to an annual inflation reading variance of up to one-tenth of a percentage point.
While reductions in price observations and increases in imputations could make CPI data less precise, particularly on a monthly basis, they are not expected to cause the same level of variation as seen in survey-driven jobs reports, which rely on a shrinking sample of respondents, RSM’s Brusuelas said.
The primary concern surrounding the CPI data is what it reveals about the trajectory of inflation and any potential pushback from the Trump administration regarding reports indicating tariffs are driving prices higher, according to Brusuelas. Such an approach could harm the presidential administration’s credibility, as it attempts to counteract public perception of rising prices and reduced purchasing power of paychecks.
In June, CPI increased to 2.7%, marking a four-month high driven by price increases, including those resulting from tariffs. The July CPI is projected to show similar trends: higher prices on a broader range of goods, partially offset by falling gas prices and moderate consumer demand, leading to an anticipated rise of 0.2% for the month and a yearly increase to 2.8%, according to FactSet consensus estimates.
This release will likely provide further evidence of tariff-induced inflation eroding consumer purchasing power, Brusuelas said. “The deterioration in purchasing power is not expected to happen with a bang but more of a slow degradation.”