Wells Fargo & Co (NYSE:WFC, XETRA:NWT) analysts expect December’s delayed consumer price index (CPI) report to show firmer monthly inflation following an unusually weak November reading, while still pointing to a continued easing in underlying price pressures.
In a note, the analysts said the prior month’s data were distorted by US federal government shutdown-related issues. “Data collection issues stemming from the longest-ever government shutdown led to a surprisingly soft November CPI report,” the analysts wrote. They added that “most, although not all, of these distortions should be unwound in the December report.”
While Wells Fargo expects consumer price inflation to accelerate on a month-over-month basis, the analysts wrote that the year-over-year trend should continue to move lower.
“Although we expect the monthly pace of consumer price inflation to pickup in December relative to November's suppressed pace, we look for the year-over-year rate of headline and core CPI, at 2.7% and 2.8%, respectively, to remain lower in December than in September and indicate that inflation has resumed its descent,” the analysts wrote.
November’s weakness reflected how prices were sampled late in the month, when holiday discounting typically intensifies, the analysts added.
“This resulted in the reported price level for November being lower than it would have been if data had been collected over the entire month,” they wrote. As a result, Wells Fargo expects a technical rebound in December, forecasting a 0.35% increase in headline CPI and a 0.36% rise in core CPI on a seasonally adjusted basis.
Goods prices are expected to drive much of the rebound, reflecting the prevalence of holiday markdowns. The analysts estimate core goods prices rose 0.37% in December, leaving them up 1.8% from a year earlier. That projection reflects expectations that some of the November distortion may linger and that tariff-related price pressures are easing.
Services inflation is also expected to firm, particularly in travel-related categories. However, the analysts cautioned that shelter inflation will lag due to methodological factors.
“Due to the six-month panel rotation used in the CPI's housing sample, we do not expect to see payback in the primary shelter categories until April,” the analysts wrote.
The note also highlighted insurance prices as a factor likely to restrain inflation in the coming months. “Easily overlooked amid the broad issues in the November CPI report was a steep drop in the health insurance component,” the analysts wrote, adding that industry earnings data point to further declines.
While motor vehicle insurance prices are expected to rise modestly in December, the analysts said industry data suggest prices will resume declining in early 2026.
The December CPI report will be released by the Bureau of Labor Statistics on January 13 at 8:30am Eastern Time.