Why Economists Are Urging Caution About November’s Inflation Report
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What recent merger involves Trump's media company and a fusion energy firm?
President Trump's media company struck a $6 billion deal to merge with a fusion power company. Plus, November inflation dropped to 2.7%. But why are economists taking the report with a grain of salt?
Even before this report came out, Fed Chairman Jerome Powell was warning that there could be potential distortions and really playing down the data.
And the Kennedy Center's board voted to rename it as the Trump Kennedy Center. It's Thursday, December 18th. I'm Sabrina Siddiqui for The Wall Street Journal, sitting in for Alex Ossola. This is the PM edition of What's News, the top headlines and business stories that move the world today. The Bureau of Labor Statistics said today that inflation fell to 2.7% in November, lower than economists expected.
Why did economists express caution about the November inflation report?
It was also down from 3% in September, and there was no October report because of the government shutdown. Economists have warned that the shutdown caused issues with data collection for the November report that may have distorted those numbers. Chow Dang, a Wall Street Journal reporter covering the U.S. economy, joins us now to discuss. Chow, you write that economists feel the inflation rate might be understated in this report. Why is that?
Well, there was a government shutdown that lasted to mid-November that prevented the Labor Department from collecting some of the data that they normally would have to compile the report. So even going into today's release, economists were warning that some of the technical workarounds the agency had to use meant that the November figure might be biased a bit downwards. Because the Labor Bureau wasn't able to collect data in October, Economists think that they made this assumption that housing costs didn't move much that month. And because the housing component composes a big part of the headline inflation, that workaround could have put downward pressure on the headline inflation reading. And then because the government shutdown lasted through November 12th, at that point, when the labor statistics officials came back to survey data, it was right around Black Friday and Thanksgiving where you traditionally see a lot of holiday discounting.
And so, again, some of the numbers collected could have been distorted by that.
And what's the thinking around how this affects the Fed's approach to interest rates?
The Federal Reserve will have December inflation numbers before it meets next time to talk about interest rates. So in some ways, it's going to be waiting for that. Even before this report came out, Fed Chairman Jerome Powell was warning that there could be potential distortions and really playing down the data.
That was The Wall Street Journal's Chao Deng. Stock markets turned higher after the inflation reading, with the Nasdaq leading the gains and closing up 1.4%. The S&P and Dow both rose by less than 1%. Trump Media and Technology Group will merge with fusion energy company TAE Technologies in a merger valued at $6 billion. The merger would split ownership of the combined company roughly down the middle. With this deal, President Trump's media company aims to capitalize on the artificial intelligence boom's need for power. The combined company says it'll start building a fusion power plant next year and hopes to generate its first power in 2031. But fusion energy isn't yet considered to be commercially viable.
Trump Media is the parent company of the Truth Social platform where the president posts frequently. Its shares rose 42% today, but for the year, the stock is still down by 56%. For more on how the Trump family's business empire is growing, visit WSJ.com to read a story that maps it all out. We'll leave a link in the show notes. In more M&A news, Hogan Lovells and Cadwallader will merge to form a $3.6 billion firm with over 3,000 lawyers. The combined company would be the fifth largest law firm by revenue. Partners at both firms will vote next year to finalize the deal. There's been a consolidation trend in the legal industry, driven by pressure to compete for market share and talent.
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