CPI Hot Again, Rent Up At Least 0.4 Percent For 30 Straight Months -

CPI Hot Again, Rent Up At Least 0.4 Percent For 30 Straight Months

Mar 12, 2024Jeremy ParkinsonFinance0

For over two years, analysts said rent was declining or soon would be. But for the 30th consecutive month, rent was up at least 0.4 percent. Gasoline rose 3.8 percent adding to the misery.CPI Data from the BLS, chart by Mish. As Hot or Hotter than Expected

The CPI was hotter than the Fed would like to see in February, up 0.4 percent, but in line with the Bloomberg consensus expectation of 0.4 percent.

All items excluding food and energy rose a hotter than expected 0.4 percent vs the Bloomberg consensus expectation of 0.3 percent.

Year-over-year the CPI rose 3.2 percent vs an expected 3.1 percent.

Year-over-year the CPI excluding food and energy rose 3.8 percent vs an expected 3.7 percent.

Yet Another Groundhog Day for RentI repeat my core key theme for over two years now. People keep telling me rents are falling, I keep saying they aren’t.Rent of primary residence, the cost that best equates to the rent people pay, jumped another 0.4 percent in December. Rent of primary residence has gone up at least 0.4 percent for 30 consecutive months! The “rents are falling” (or soon will) projections have been based on the price of new leases and cherry picked markets. But existing leases, more important, keep rising.Only 8 to 9 percent of renters move each year. It’s been a huge mistake thinking new leases and finished construction would drive rent prices.Moreover, some of the alleged declines failed to take in seasonal adjustments. Most people move between May and September. It’s harder to fill a lease in December pressuring rents in the winter.Let’s tune into the BLS Report for the more details. CPI Month-Over-Month Details

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in January on a seasonally adjusted basis, after rising 0.3 percent in January.

The index for shelter continued to rise in January, increasing 0.4 percent, after rising 0.6 percent in January.

The energy index rose 2.3 percent over the month. Gasoline rose 3.8 percent.

Shelter and energy contributed over sixty percent of the monthly increase in the index for all items.

The food index was unchanged in February otherwise the headline number would have been worse. Food at home was unchanged and the food away from home index rose 0.1 percent over the month.

The index for all items less food and energy rose 0.4 percent in February, as it did in January.

Indexes which increased in February include shelter, airline fares, motor vehicle insurance, apparel, and recreation. The index for personal care and the index for household furnishings and operations were among those that decreased over the month.

CPI Year-Over-YearCPI Year-Over-Year Details

The CPI is up 3.2 percent from a year ago. That’s negative progress compared to the 3.0 percent registered in June of 2023, 8 months ago. It’s no progress compared to the 3.2 registered in July of 2023, 7 months ago.

Rent of primary residence and shelter are up 5.8 percent and 5.7 percent respectively, from a year ago.

Food an beverage is up 2.2 percent from a year ago and perhaps as good as it gets. I expect another jump in food away from home.

CPI excluding food an energy, a measure the Fed closely follows is up 3.8 percent from a year ago. That’s 1.8 percentage points higher than the Fed’s 2.0 percent target.

Energy is down 1.9 percent from a year ago. Gasoline is down 3.9 percent from a year ago.

Energy has ceased contributing to the easing of year-over-year prices and I expect food will soon be in that category.CPI Month-Over-Month Rent and OERCPI data from the BLS, chart by Mish OER stands for Owners’ Equivalent Rent. It is the price people would pay to rent a house unfurnished, without utilities.People keep repeating the myth that OER is based off the question “If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?”That is false. Rather, that silly question is used to help set CPI weights, not prices. Prices are real measured prices of rent.Real Measured PricesBased on minor imputations, some claim OER is not a “real price”.However, imputations border on trivial. The price is real.CPI Weights and Other IssuesRather than bicker over the measured price of OER, the far bigger issue is weight. OER is the single largest component of the CPI with a weight of 26.766 percent as of February 2024. Rent of Primary Residence is 7.655 percent. Shelter comprises 36.222 percent.Do people pay OER? No they don’t. That’s what’s “unreal”, not the measured price. Roughly 64 percent own their own home with 36 percent renting.The people who own their own home do not pay rent, they pay a mortgage. Most homeowners refinanced at lower rates, many at or near 3 percent.Some economists want to strike OER from the CPI on this basis. The problem I have with that idea is “Inflation matters” not just “consumer inflation”. Home prices matter. Asset bubbles matter.The CPI is totally screwed up as a measure of inflation and ignoring OER and housing bubbles does not address the issue.The 36 percent of the people who do rent have been royally screwed by Fed policy that inflated assets, especially home prices, in turn causing rents to soar.Refinancing put extra money in the pockets of homeowners every month. Rising wages with a constant mortgage rate fuels demand for goods and services and that pressures overall inflation.This is why I expect inflation to be sticker than the Fed believes.Is the BLS Is Overstating Rent and Exaggerating Inflation?On December 7, I investigated A Curious Claim that the BLS Is Overstating Rent and Exaggerating InflationI provide solid evidence that the BLS has been doing no such thing.Why Predictions of When the Price of Rent Will Fall Have Been WrongFor further discussion of rent, please see my January 1, 2024 post Why Predictions of When the Price of Rent Will Fall Have Been WrongI address seasonality, five different measures of rent, and how the BLS smooths things outFactor in BidenomicsIn addition to the mess the Fed made in housing, one needs to factor in the inflationary impacts of Bidenomics.Our net zero lesson of the day is The True Costs of Net Zero Are Becoming Impossible to HideBiden taunted the Supreme Court on Student Debt Cancellation: “The Supreme Court Didn’t Stop Me”Biden’s regulations, big union wage increases, and student debt cancellation are all inflationary.Big Explosion of Government and Social Assistance JobsPresident Biden is bragging about job growth. But he doesn’t say where those jobs are.Data from the BLS, chart and calculations by Mish. On March 8, I noted a Huge Percentage of Job Gains are Related to Taking Care of Immigrants

The surge in government jobs and social assistance jobs is soaring to handle the massive influx of immigrants.

Health care jobs are rising for the same reason but also because of demographics. Aging boomers need more assistance.

Everything this president does adds to inflation. Don’t expect that to change.More By This Author:Expect Another Surge In Food Prices Fueled By Dynamic Pricing Huge Percentage Of Job Gains Are Related To Taking Care Of Immigrants Jobs Up 275,000 With 52,000 More Government Jobs, Employment Down 184,000