Discussion on Small Business Challenges Amid Economic Pressures
A panel discussion on “The Big Money Show” will delve into whether small businesses are feeling the pinch from inflation, increasing borrowing costs, and corporate dominance, especially as Wall Street profits rise while Main Street faces record-high bankruptcies.
The Department of Labor is set to release the Consumer Price Index (CPI) for December on Tuesday. Despite ongoing disruptions in data collection due to the government shutdown, inflation levels remain high, above the Federal Reserve’s target of 2%.
FactSet forecasts that, for December, headline inflation might have increased by 0.3% month-over-month and 2.6% year-over-year, while core inflation—excluding the more fluctuating food and energy prices—could have risen by 0.26% month-over-month and 2.6% year-over-year.
Economists have expressed concerns that the 43-day government shutdown might not only impact economic metrics but also distort the forthcoming December CPI data, which they’ve noted might face limitations in accuracy.
Greg Daco, chief economist at EY Parthenon, mentioned in an interview that the upcoming report may present ambiguities, given the lingering uncertainties regarding October and November’s CPI figures. He emphasized that many data points were influenced by the shutdown.
Recent minutes suggest a significant division among Fed policymakers regarding a potential rate cut in December, which raises questions about future cuts.
Daco anticipates headline and core CPI will rise by 0.3% month-to-month and 2.7% year-over-year for December, with some pressure stemming from energy and grocery prices. He even pointed out a possible upside risk pushing inflation to 2.8%, largely due to the uncertain data collection in recent months.
According to Daco, the Bureau of Labor Statistics (BLS) opted for a carryover method during the shutdown, assuming prices would remain stable for the month—a method he criticized, noting that this gave a downward bias to inflation trends.
He pointed out that the methodology regarding housing rent and valuations particularly reflects inaccuracies, as the BLS tracks home valuations on a six-month rolling basis without factoring in potential changes in the interim.
Moreover, he highlighted that November’s CPI data collection occurred late in the month, coinciding with additional discounts on essential items, suggesting that the results might also show a downward bias.
As the government shutdown’s effects continue to skew inflation statistics, Daco emphasized that while some offset is expected, it won’t happen overnight. The speed at which this distortion is corrected remains uncertain.
Oxford Economics similarly forecasts a 0.3% increase in the overall CPI and Core CPI in December but warns that distortions from the shutdown will likely obscure the CPI signal. They noted that apparel and recreational goods data from November was particularly low due to holiday discounts.
They concluded that the BLS will be reporting CPI at artificially low levels through December, projecting that any corrections for this downward bias won’t materialize until April 2026.
