Do you belief these numbers? Economists see many flaws within the delayed CPI report, which reveals falling inflation

A significantly lower-than-expected consumer price report for November was released on Thursday, breaking the recent trend of stubborn inflation.

Stocks skyrocketed. Yields fell. The chances of a Federal Reserve interest rate increased.

And many economists scratched their heads.

The Bureau of Labor Statistics reported that the consumer price index had an annual inflation rate of 2.7% last month, while the core CPI – a measure that excludes volatile food and energy prices – was even lower at 2.6%. Both were below economists’ estimates, as people surveyed by Dow Jones called for a headline annual rate of 3.1% and a core CPI rate of 3%.

Thursday’s release of November data was delayed eight days due to the U.S. government shutdown, but more importantly, October data was scrapped, leaving the BLS to make certain methodological assumptions about the previous month’s inflation levels.

These assumptions in the methodology were not clear to the economists and were not fully explained in the press release.

“The negative surprise reflects weakness in both goods and services, but may be due in part to methodological issues. The BLS may have advanced prices in some categories, which would have effectively assumed 0% inflation,” Michael Gapen, chief U.S. economist at Morgan Stanley, said in a note, calling the November readings “noisy” in a way that makes it “hard to draw firm conclusions.”

“If these technical factors are the main cause of the weakness, we could see another acceleration in December,” Gapen added.

The main topic: OER

Economists viewed a particularly important section of the data as problematic: owners’ rent. This is an important part of calculating inflation in the real estate market.

UBS economist Alan Detmeister said October price changes for OER appeared to have been “zeroed out”.

Evercore ISI’s Krishna Guha dug deeper, saying it appears that the BLS “assumed zero inflation in several categories” when calculating OER for about a third of the cities in use.

“To the extent that it introduces a downward bias, the Fed would be cognizant of the risk of taking housing services inflation data at face value,” he wrote in a note Thursday.

Detmeister said the effects could last for several months.

“This weakness should be reversed by very strong OER and tenant increases in the April CPI, which will be released in May, but until then OER and tenant rent price levels will trend downward,” he said.

Wolfe Research’s Stephanie Roth estimates that the 0.13% increase in rent and the 0.27% increase in OER in the two-month period represent increases of about 0.06% and 0.13%, respectively, from the previous month.

CNBC has reached out to BLS for comment.

There were other problems too.

Roth noted that there was likely downward pressure on certain categories of goods because the BLS data collection period occurred later in November, a time when there were “more holiday discounts.”

“The market appears to be interpreting the data as a dovish signal, but given the technical quirks, we expect the Fed to place less weight on this reading,” she said in a note to clients. “While positive inflation does not appear to be rising sharply due to tariffs, a rebound is likely to occur as data normalizes following the volatility associated with the shutdown.”

To be sure, there was some skepticism about the report ahead of its release, with some on Wall Street expressing concerns about bias due to the impact of the shutdown, which ended in mid-November.

The enthusiasm on Wall Street that followed the release faded as trading continued. Stocks were off their highs, with technology stocks doing most of the heavy lifting and stocks more tied to the economy like banks in the red. Yields were also below their lows.

— With reporting by Steve Liesman