"Data Drought" Welcomes CPI, Will the Market Be Surprised or Delighted Tonight?

According to the Zhitong Finance APP, Wall Street is extremely eager for data this month, with the September Consumer Price Index (CPI) report released on Friday becoming almost the sole focus, increasing its likelihood of being a key event influencing market trends.

Although the actual data is expected to remain roughly in line with levels from recent months, the severe shortfall in official economic reports due to the government shutdown means that even slight deviations in data could trigger market volatility far beyond usual levels.

"Given that we haven't received any government data recently, I believe all market focus and attention will be on this report," said Troy Ludtka, senior U.S. economist at SMBC Nikko Securities. "The importance of this report can be said to be 'decisive.'"

However, from Wall Street's general expectations, the CPI data released by the U.S. Bureau of Labor Statistics is likely to continue the previous trend.

According to a Dow Jones survey, economists expect the overall CPI for September to rise by 0.4% month-on-month, remaining the same as August; the year-on-year increase is expected to be 3.1%, up 0.2 percentage points from August. The core CPI, excluding food and energy, is expected to rise by 0.3% month-on-month, with a year-on-year increase of 3.1%, both remaining the same as August. If the year-on-year data is accurate, it will mark the highest level since January this year.

What Wall Street is truly concerned about is whether the data will deviate from expectations—whether it signals "overheating" with inflation above expectations or "cooling" with inflation below expectations. Additionally, the impact of the Trump administration's tariff policies on prices, as shown in the report details, will also be a key observation direction.

This report, originally scheduled for release on October 15, will also be the last important economic data before the Federal Reserve's policy meeting next Wednesday. The U.S. Bureau of Labor Statistics has recalled some employees to complete data compilation, as the CPI is the core benchmark for adjusting the cost of living for Social Security.

Data Shrouded in Mystery

Goldman Sachs economists expect that car prices will remain basically stable in September, while car insurance costs will rise and airfares will decline. Regarding tariff impacts, Goldman noted in the report that prices in categories such as communications, household goods, and entertainment may face "upward pressure," but the expected pull on core inflation is only 0.07 percentage points.

However, against the backdrop of a large-scale government shutdown, overall economic data resembles a black box, raising doubts about the reliability of the CPI data.

"Due to the government shutdown, key data points that the market relies on are missing, and we cannot obtain a comprehensive and clear economic picture," said Vishal Khanduja, head of broad market fixed income at Morgan Stanley Investment Management. "This will undoubtedly further exacerbate market uncertainty."

In fact, investors have been on edge recently; despite ongoing fluctuations in intraday trading, major stock indices remain near historical highs.

Geopolitical uncertainty is a core source of concern, especially the constantly changing tariff situation—markets worry that rising prices may drag down the currently strong economic growth that exceeds expectations. Although the government shutdown may disrupt data accuracy, this CPI report can at least answer some of these questions to a certain extent This report is crucial for both the market and the Federal Reserve. The Federal Reserve will hold a policy meeting next week, and the market widely expects officials to approve another 25 basis point rate cut.

"From a market impact perspective, only a significantly higher-than-expected data surprise could change the market's expectation for another rate cut," noted Julien Lafargue, Chief Market Strategist at Barclays Private Bank.

In addition to the repeated fluctuations of the trade war, a new round of strong earnings season has also provided support for the market. Before the government shutdown, economic data had shown that the resilience of the U.S. economy exceeded expectations: according to the Atlanta Federal Reserve, the GDP growth rate for the third quarter is expected to be close to 4%.

While breaking the current narrative of "strong economy" requires a significant event, an unexpected CPI report might just be enough to serve as this "catalyst."

"If inflation data comes in higher than expected, I think the market will experience volatility," said Stephanie Link, Chief Investment Strategist at Hightower Advisors. "But I would view it as a buying opportunity—after all, the current economic fundamentals are strong, the Federal Reserve has begun a rate-cutting cycle, corporate earnings per share are growing at double-digit rates, and the fourth quarter is traditionally the strongest seasonal performance quarter of the year."