Carefully Selected Quotes,
by Ye Editor
... "Reality on the ground is even worse for many people because CPI is slow to pick up the red-hot housing inflation as we’ll see in a moment, and because CPI structurally is skewed to represent the inflation felt by higher-income households, while lower income households, as Fed governor Lael Brainard pointed out last week, face higher inflation and feel it much more.
The overall Consumer Price Index (CPI-U) spiked by 1.2% in March from February, and by 8.5% from a year ago, the worst since 1981, according to data released by the Bureau of Labor Statistics today.
But in 1981, the Fed was effectively cracking down on inflation with double-digit policy interest rates, and inflation was on the way down. Now inflation is spiking, and the Fed is still repressing short-term interest rates to near 0%,
and it still holds $8.9 trillion in assets on its balance sheet as a result of years of money printing, including $4.8 trillion that it printed over the past two years to repress long-term interest rates and to produce the biggest wealth disparity ever. And now we’re surprised by this spike in inflation?
There is no period in history that compares to this period, not even the 1970s because the Fed wasn’t printing money in the 1970s.
In March 2022, the purchasing power of $100
in January 2000 dropped to a new record low of $58.80.
... Given how slowly the CPI is in picking up the surging housing costs, this portion of the CPI will continue to get worse, even as prices of gasoline and used cars might come down some.
The largest component in CPI is “shelter,” a basket of services that is designed to represent housing costs and accounts for 32.7% of total CPI. The largest components in this basket are “Rent of primary residence,” accounting for 7.3% of total CPI, and “Owner’s equivalent rent of residence,” accounting for 24.0% of total CPI.
“Rent of primary residence” jumped by 4.4% in March. This tracks what tenants reported as their actual rent payments, including in rent-controlled apartments. “Owner’s equivalent rent of residences” rose 4.5%. This tracks the costs of homeownership as a service, based on what homeowners reported that their home would rent for.
Because both of these rent measures are lagging indicators, ... So these housing components that weigh much more heavily than used cars or gasoline are guaranteed to provide upward pressure on CPI well into 2023 (my discussion of this phenomenon). Note that both measures are still well below the overall CPI and therefor are still holding down CPI ...
In terms of “asking rents” across the US:
The Zillow Rent Index has shot up 16.8%
year-over-year, despite the slight dip in March.
The actual costs of purchasing a house spiked by 19.2% year-over-year, according to the Case-Shiller Home Price Index, with some totally crazy raging mania in some markets ...
One chart below shows the disconnect
of housing costs in CPI and the reality
homebuyers are facing:
... The CPI for used vehicle prices fell for the second month in a row (-3.8% in March from February), which whittled down the year-over-year spike to a still crazy 35.3%. ... The CPI for new vehicles ticked up just a tad in March from February, but year-over-year was up 12.5%, the second worst ever, behind the 12.7% spike in 1975.
The CPI for nondurable goods – which is dominated by food, energy, and household supplies – spiked by 13.1%, the worst since 1980:
Cereals and cereal products: 10.1%
Beef and veal: 16.0%
Pork: 15.3%, as folks switched to pork from beef.
Poultry: 13.2%, as folks switched to poultry from pork.
Fish and seafood: 10.9%
Eggs: 11.2%
Fresh fruits: 10.1%
Fresh vegetables: 5.9%
Dairy and related products: 7.0%
Coffee: 11.2%
Fats and oils: 14.9%
Baby food: 10.8%
Energy costs exploded by 11.0% for the month
and by 32.0% year-over-year. They weigh 7.6%
of overall CPI. Among them:
Gasoline:
+18.3% for the month and +48.0% year-over-year.
Utility natural gas to the home:
+0.6% for the month and +21.6% year-over-year.
Electricity service:
+2.2% for the month, +11.1% year-over-year.
... Bitcoin has plunged by 33% against the dollar year-over-year, and by 41% against the dollar from the peak in November. Plus, on top of it, Bitcoin lost another 8.5% in purchasing power due to inflation. So do the math, in terms of this being a hedge against anything."
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