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CPI Distorted by Bad Shelter Estimate

Writer: InfraCap Management
InfraCap Management
21 hours ago
1 min read

Headline CPI printed in line at .6% and year over year came in at 3.7% while core CPI printed hot at .3% vs. expectations of .2% and year over year rose to 2.6% vs. consensus at 2.5%,  The bulk of the surprise came from a hot shelter print at .4% vs. the prior 3-month average of .1%.  The volatile lodging away from home was 2% for the month which is an annual rate of 20%.  

 

The shelter component is highly unreliable as the BLS uses 6 different panels for its surveys that it only updates every 6 months so any particular panel can be distorted.  If one uses market rents to estimate the shelter component of CPI, year over year Core CPI would only be 1.4%.  We continue to forecast that the Fed will only increase rates one more time in December as the 1.25% increase in the 10-year has significantly tightened financial conditions, which will cause the housing market to go into a deep recession and cause economic growth and labor strength to attenuate.

 
 
 

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