SHELTER COSTS STILL DEFLATIONARY
by ilene - September 20th, 2010 4:48 pm
SHELTER COSTS STILL DEFLATIONARY
Courtesy of The Pragmatic Capitalist
Last Friday’s CPI report was hardly cause for concern with regards to the inflation outlook. The core year over year rate was astonishingly low at just 1.2% while the exclusion of food and energy actually reduced the year over year rate to just 1%. While the PPI reports are clearly showing higher rates of inflation, it’s also clear from the consumer inflation data that these costs are not getting passed along. This is just one more clear sign of weakness at the household sector.
While food and energy tend to catch the media spotlight (they are the most volatile and noticeable after all) they’re not the largest components of consumer costs even if you combine the two. Shelter costs are by far the largest input in the consumer cost equation. A look at last week’s data shows the deflationary tendencies in this data. Econoday highlighted this over the weekend:
“In the core, shelter costs continued to stand out—as weak. Just when you thought they could not get softer, they did. Shelter costs were flat in August after rising only 0.1 percent in each of the prior fourth months. Again, this reflects the weak housing market and also a sluggish travel market for lodging while away from home. Shelter costs are so week that on a year-ago basis they were down 0.5 percent in August.”
When we actually include housing costs in the equation we get a similar deflationary trend. Based on my data housing costs are just marginally deflationary at -0.25% year over year. I’ve taken the CPI data a step further and actually added the Case Shiller data. Since roughly 70% of Americans are homeowners, I replaced 2/3rds of the housing component in the CPI data with the house
The BLS has a relatively controversial way of calculating the housing component of the CPI – they use what is called owners equivalent rent (OER). This estimates what your house might rent for if you were so inclined. What’s misleading here is that the data doesn’t really reflect consumer costs and thus psychology. The last decade is a prime example. Rising home values have a wealth effect. Consumer 
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Big Blah (CPI)
by ilene - December 16th, 2009 2:14 pm
Big Blah (CPI)
Courtesy of Karl Denninger at The Market Ticker
From the Bullcrap Lie Society (BLS) of our government this morning:
On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4 percent in November, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months the index increased 1.8 percent before seasonal adjustment, the first positive 12-month change since February 2009.
Most of the change was due to energy; gasoline was up sharply (as we saw yesterday in the PPI.)
Core was a literal zero.
Food was up a bit, but I continued to be puzzled by the difference between gasoline and "fuel oil."
Why? Because "fuel oil" (that is, heating oil) is exactly the same thing as #2 diesel – that is, road diesel fuel. The only difference is the tax (and the presence of dye in the heating oil to denote that the tax has not been paid.) But for the legal (tax) issues you can run "heating oil" in your diesel car or truck, and vice-versa – they are identical products.
Used vehicles were also up materially – a reflection of the distortion from "cash for clunkers" still present in the data (it hit its maximum in October at +3.4%) Prices for new vehicles were also up (again, the maximum was in October) – again denoting the "back-door" bailout of the automakers from cash-for-clunkers. Unlike the new vehicle deal however, which you got a tax credit for, the buyer of a used car just got plain old-fashioned screwed through price-jacking caused by constraints in supply. (Just wait though – in the new year when people can’t make the payments on those CFC deals, you’ll see what happens to used car prices…. supply and demand you know.. 
)
Medical care was up as usual (gee, how come it keeps rising faster than overall inflation?) and shelter costs were down (remember, this is not "housing", as that would expose reality – it is "owners equivalent rent")
All in all a blah report – but given the PPI that’s expected – the fun and games in the CPI report resulting from yesterday’s PPI should show up in a month or two.
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW.