Contradiction in US Economic Data as Prices Continue to Climb
Official data has revealed that prices in the United States continued to rise in November, directly contradicting a recent claim by President Donald Trump that they were falling "very fast". The latest Consumer Price Index showed an annual inflation rate of 2.7% for the year to November, a figure released just a day after the President's televised address.
This new data, published on Wednesday morning, marks a slight decrease from the 3% rate recorded in September. However, it still fell short of economists' expectations, who had anticipated a figure of around 3.1% for last month. The report comes amid significant questions over the true strength of the US economy, exacerbated by a historic federal government shutdown that halted the collection of key statistics.
Shutdown Creates Data Gap and Economic Uncertainty
The lengthy government closure meant there was no inflation report for October at all, and data for November was only gathered during the second half of the month. This gap has created a murky picture for policymakers and analysts trying to gauge the economy's direction.
Despite the official numbers, President Trump insisted in a live TV address on Tuesday night that he was bringing high prices down rapidly. "I am bringing those high prices down, and bringing them down very fast," he stated. The White House has consistently argued that any persistent inflation is a remnant from the previous Biden administration, a point Trump echoed at a rally in Pennsylvania last week, saying, "They caused the high prices and we’re bringing them down."
Rising Prices Meet Climbing Unemployment
The economic landscape presents a complex challenge. While price growth has retreated sharply from the generational high of 9.1% in June 2022, it has stubbornly remained above standard levels. After dipping to 2.3% in April, the rate has climbed again, fuelling ongoing concerns about affordability for American households.
Compounding the issue, the latest rise in prices coincides with a climbing unemployment rate, which hit 4.6% in November—a four-year high. In a contradictory labour market signal, the economy added 64,000 jobs last month, which was higher than economists anticipated, but this followed a loss of 105,000 jobs in October.
Economists widely agree that Trump's trade policies have contributed to price pressures. Although exemptions were made for items like coffee and beef, the overall effective tariff rate is the highest it has been since 1938. Analysis from the Yale Budget Lab estimated that, even with exemptions, the tariffs will cause prices to rise by approximately $1,700 for the average American household.
Recent polling indicates that the public, still sensitive to the major increases seen in 2022, is increasingly blaming Trump for high costs. His net approval on handling prices has fallen more sharply than on other issues like immigration. Furthermore, consumer expectations for future inflation have soared this year, according to the University of Michigan’s Survey of Consumers.
This mix of rising prices and unemployment has placed the Federal Reserve in a difficult position. The central bank, tasked with balancing both, reduced interest rates three times this year but resisted calls from the President for deeper cuts. Fed Chair Jerome Powell noted the complexity last week, stating, "We are committed to 2% inflation, and we will deliver 2% inflation, but it is a complicated and difficult situation where the labor market is also under pressure."
With interest rates currently in a range of 3.5% to 3.75%, Fed officials have signalled a potential pause in further cuts as inflation and unemployment appear to be reaching a tentative balance. Powell also cautioned that officials will assess the November data carefully due to the shutdown's impact, advising a "somewhat skeptical eye" ahead of the January policy meeting.
