One day after delivering a primetime speech to address his administration’s economic policies, President Donald Trump received a Christmas present, a bombshell inflation report that left market watchers stunned. Consumers have been unsurprisingly frustrated by persistently high prices, but new numbers could indicate that affordability pressures are easing heading into 2026.
November Inflation Report
The Bureau of Labor Statistics published the November consumer price index (CPI) report on December 18. Ahead of the data, economists expected the headline annual inflation rate would rise to 3.1%. Core inflation, which removes energy and food from the equation due to their volatility, was also expected to hold steady at 3%. Surprise, surprise – the numbers beat estimates.
November’s annual inflation rate slowed sharply to 2.7%, from 3%. The 12-month core CPI also eased substantially to 2.6% from 3%. What’s more, core inflation is at the lowest level since March 2021. The October figures were not released because of the 43-day government shutdown. But this might not matter, considering some of the September-November numbers were tepid, such as shelter (0.2%), energy (0.2%), and food (0.1%).
Even when combing through tariff-sensitive components of the CPI data, they hardly budged, rising only modestly over the past year. On a year-over-year basis, the indexes for apparel and new vehicles, for example, are up just 0.2% and 0.6%, respectively.
One word could best describe the latest inflation report: Wow. And to no one’s surprise, the White House Press Secretary Karoline Leavitt took a victory lap:
“Just as President Trump told Americans last night: inflation continues to fall, wages continue to rise, and America is trending towards a historic economic boom. Today’s report shows that inflation came in far lower than market expectations – a stark comparison to the record-high 9% inflation crisis caused by Joe Biden. Core inflation is at a new multi-year low, as prices for groceries, medicine, gas, airfare, car rentals, and hotels keep falling. Americans can expect this trend of lower prices and bigger paychecks to continue into the New Year!”
But consumer prices were only half of the story. The number of Americans filing for unemployment benefits declined to a lower-than-expected 224,000 for the week ending December 13, according to the Department of Labor. The four-week average, which removes week-to-week volatility, was little changed at 217,500. Recurring claims, a measure of the number of unemployed people receiving jobless benefits, remained below 1.9 million for the second straight week.
While the November jobs story was not a good one, the weekly jobless claims provide an up-to-date reading of the US labor market. And the newest data suggest conditions are stable.
It was no surprise that investors cheered the statistics. The leading stock market benchmark averages popped as much as 1.5%. The lighter-than-expected inflation and the smaller-than-expected jobless claims could be a recipe for the Federal Reserve to pull the trigger on a fourth consecutive quarter-point interest rate cut in January – and maybe another one at the meeting thereafter.
Biden vs Trump
Suffice it to say, December 18 was a terrific day for Trumponomics 2.0, especially compared to his predecessor when reviewing historical data. During Trump's first ten months back in office, consumer inflation rose at a seasonally adjusted pace of about 1.9%. By comparison, inflation soared more than 6% in former President Joe Biden’s initial January-November period.
To quote former White House Press Secretary Karine Jean-Pierre, this has provided the American people with some breathing room. With earnings rising faster than inflation this year, the average weekly paycheck now buys 1.6% more than it did in January. That follows a 4% drop in purchasing power during the previous administration.
Will this be a winning message heading into the midterm season? It all depends on how much consumer sentiment evolves over the coming months, and how Trump’s critics use the data. For now, it will be a holly jolly Christmas for the administration.
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