'Apollo's Torsten Sløk warns of continued deterioration in quality of CPI data'

 Inflation is being closely watched right now by several parties, ranging from U.S. President Donald Trump's administration to the Federal Reserve to followers of economic data and monetary policy. All are on close watch for any expected impacts from tariffs.

At such a time, Apollo Academy has warned that the quality of the highly scrutinized consumer price index (CPI) data is continuing to deteriorate.

"To calculate CPI inflation, BLS teams collect approximately 90,000 price quotes every month covering 200 different item categories, and there are several hundred field collectors active across 75 urban areas," Torsten Sløk, Apollo's chief economist, said on Saturday, referring to the U.S. Bureau of Labor Statistics.

"When data is not available, BLS staff typically develop estimates for approximately 10% of the cells in the CPI calculation. However, the share of data in the CPI that is estimated has increased significantly in recent months and is now above 30%," Sløk added. 

See the chart he shared below:

Apollo Academy

"In other words, almost a third of the prices going into the CPI at the moment are guesses based on other data collections in the CPI," the economist said.

While the Fed sees the core personal consumption expenditures price index as its favored inflation gauge, the CPI also gives clues to policymakers about the state of consumer prices. The Fed has held its key policy rate steady for four straight meetings as it prefers to remain in wait and watch mode for the inflationary effects of tariffs. 

CPI data this year has shown consumer inflation has remained remarkably tame, especially considering the turmoil caused by Trump's tariffs. The inflationary impact of the trade barriers showed up in the latest CPI data for June. 

See the chart below:

U.S. Bureau of Labor Statistics

Wall Street put in a strong showing this week, with the benchmark S&P 500 index (SP500) notching its 14th record close of the year. Sentiment was boosted by positive trade developments and solid quarterly reports from some of the world's largest companies.   

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