Cooking the Books

It now appears that we have evidence that the Trump administration is manipulating economic data for their own political gain.

Gee, who could have seen that coming?

An obscure methodological change lowered a key measure of inflation in January, prompting questions about how government statistical agencies produce and report economic data.

Deep inside its monthly inflation report on Friday, the Bureau of Economic Analysis said that the cost of legal services rose 1.8 percent in January. That was an unusually large increase, but not nearly as big as the double-digit gain that some forecasters were expecting.

The reason for the divergence: The agency, which is part of the Commerce Department, had changed the source of its data on legal prices, relying on wholesale prices from the Bureau of Labor Statistics rather than the consumer price data it usually uses.

A technical tweak to such a small category — legal services account for less than 1 percent of overall consumer spending — would ordinarily draw little notice.

But in this case, the adjustment was enough to shave roughly a tenth of a percentage point off the monthly change in the core Personal Consumption Expenditures price index. That is a meaningful difference to investors, who track even tiny moves in the index for hints of when and how the Federal Reserve will next adjust interest rates. The central bank officially targets the P.C.E. index, not the better-known Consumer Price Index, when making policy decisions.

The bureau provided no public disclosure of the change. Economists learned about it only when they reached out to the agency to understand why their forecasts had been so far off.

As I have said repeatedly, the economic data from the Trump administration should not have the presumption of regularity. (See here, here, here, and here)