Consumer Price Index January 2021
This morning the BLS released the CPI Report for January 2021.
- The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in January on a seasonally adjusted basis.
- The gasoline index continued to increase, rising 7.4 percent in January and accounted for most of the seasonally adjusted increase in the all items index.
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The energy index rose 3.5 percent over the month. The food index rose slightly in January, increasing 0.1 percent as an advance in the index for food away from home more than offset a decline in the index for food at home.
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The index for all items less food and energy was unchanged in January. The indexes for apparel, medical care, shelter, and motor vehicle insurance all increased over the month. The indexes for recreation, used cars and trucks, airline fares, and new vehicles all declined in January.
Revisions
Not only was the CPI tame, but the BLS revised December from a reported 0.4% to 0.2% month-over-month and the CPI excluding food and energy from 0.1% to 0.0%.
Expectations
Econoday economists expected 0.2% excluding food and energy. The number came in at 0.0%. Year-over-year, economists expected 1.6% with actuals at 1.4%.
Year-Over-Year Since 1971
Year-Over-Year Numbers
- Over the last 12 months, the all items index increased 1.4 percent before seasonal adjustment.
- The index for all items less food and energy also rose 1.4 percent over the last 12 months, a smaller increase than the 1.6-percent rise for the 12 months ending December.
- The food index rose 3.8 percent over the last 12 months.
- In contrast to these increases, and despite rising in recent months, the energy index declined 3.6 percent over the last year.
Fantasy Inflation Numbers
The BLS arrives at these numbers by concluding the cost of shelter fell from 3.1% at the start of the Covid pandemic to a mere 1.6% in January.
The cost of medical care services purportedly fell from 5.3% year-over-year to 2.9%.
Ask anyone who pays for their own medical care insurance if their year-over-year costs look anything like that shown in the long-term chart.
Ask the same question to anyone looking to buy a house.
OK, rent prices dropped in the pandemic because people started working at home and moving out of big cities.
The focus on “consumer” inflation picks this up. And it ignores medical care costs because most people are covered at work or are on Medicare or Medicaid.
Inflation: How Should We Measure It?
The Fed’s focus on CPI vs other measures of inflation is a huge mistake.
Inflation is booming if one looks at housing prices and the true cost of medical care services regardless of who is paying.
History also shows it is a serious mistake for the Fed to ignore asset bubbles, and those are part of inflation too, just not the CPI.
For discussion please see Inflation: How Should We Measure It?
The CPI purportedly measures consumer inflation. The problem is “consumer inflation” is a very poor measure of actual “price inflation”.
It’s inflation that matters, not alleged consumer inflation.
But the Fed, economists, and mainstream media all have their eyes on the CPI.
Ignoring Inflation
Meanwhile, despite inflation and clear asset bubbles, the Fed says Monetary Policy Will Stay Accommodative For a Very Long Time.
Translated, that means forever or until a global currency crisis changes their tune.
Mish
for reasons discussed ad nauseum, the cpi is designed to filter out price increases and doesn’t reflect anyone’s cost of living. Certainly not mine.
here comes the conspiracies theories…that the govt is manipulating the CPI. please check the Billion prices project by MIT. it closely follows the CPI index
They need something else to financialize to keep the game going. link to paulcraigroberts.org
“…Offshoring served the interests of corporate executives and shareholders. The lower labor costs raised profits and, thereby, executive bonuses and the prices of the stocks, resulting in capital gains for shareholders.”
I mention this a lot here, it’s the reason household debt has near doubled in 40 years, the Fed has to keep rates low to free disposable income while median wages fail to grow @ inflation from reduced domestic labor demand.
Also, in tandem with globalization, our domestic tax policy was to reduce taxes on those executives & shareholders under the guise of “job creation”, ironically the jobs were created in Mexico, India, China….
I’d be interested in hearing what he thinks of the concept of Reaganomics Trickle-down now, 40 years after the fact.
“Ask the same question to anyone looking to buy a house.”
But, most of us already own (well, share ownership with the bank) our house.
Changes in house prices are completely irrelevant to our cost of living.
Except at property tax remittance time.
“The gasoline index continued to increase,”
I don’t care. we are down to buying 100 gallons/year. I don’t care is gasoline costs $2.60/gal (for premium) or $4.50/gal.
I cannot get excited about $200 possible delta in $100K/year household expenses.
“Ask anyone who pays for their own medical care insurance if their year-over-year costs look anything like that shown in the long-term chart.”
I agree about long term.
But, on the other hand, my wife’s Obamacare (Kaiser) went from $723/month in 2020 to $733 in 2021. That is only 1.5%. My Medicare is unchanged.
You wife pays 723 a month for insurance???
That’s a mortgage payment or the equivalent of a new $30K car every 4 years. That’s insane unless the deducible is next to zero or she has some crazy health issues that cause her insurance to be so high.
You have obviously not purchased medical/health insurance on the open market as we have since 2000.
Dave, I’m younger, but not much, my (bronze) plan’s $200 less, that’s insane.
To me, $723 sounds cheap. I can’t find information on current rates, but in 2019 the average single rate in my state was $866/month, but fell to $765/month in 2020. That’s deflation, I guess. 😉
“You have obviously not purchased medical/health insurance on the open market…”
Technically speaking, no one has purchased health insurance on the “open market” for quite some time!
The inflation rate is a fantasy number but the FED has acknowledged that the official unemployment rate is flawed in a speech given today where he said:
After rising to 14.8 percent in April of last year, the published unemployment rate has fallen relatively swiftly, reaching 6.3 percent in January. But published unemployment rates during COVID have dramatically understated the deterioration in the labor market. Most importantly, the pandemic has led to the largest 12-month decline in labor force participation since at least 1948.5 Fear of the virus and the disappearance of employment opportunities in the sectors most affected by it, such as restaurants, hotels, and entertainment venues, have led many to withdraw from the workforce. At the same time, virtual schooling has forced many parents to leave the work force to provide all-day care for their children. All told, nearly 5 million people say the pandemic prevented them from looking for work in January. In addition, the Bureau of Labor Statistics reports that many unemployed individuals have been misclassified as employed. Correcting this misclassification and counting those who have left the labor force since last February as unemployed would boost the unemployment rate to close to 10 percent in January (figure 6).
Perhaps the FED will come clean with the inflation rate and stop insulting our intelligence. 10% unemployment rate is more believable than the 6.3% reported rate.
“…Offshoring served the interests of corporate executives and shareholders. The lower labor costs raised profits and, thereby, executive bonuses and the prices of the stocks, resulting in capital gains for shareholders.”
I mention this a lot here, it’s the reason household debt has near doubled in 30 years, the Fed has to keep rates low to free disposable income.
Also, in tandem with globalization, our domestic tax policy was to reduce taxes on those executives & shareholders under the guise of “job creation”, ironically the jobs were created in Mexico, India, China….
I’d be interested in hearing what he thinks of the concept of Reaganomics Trickle-down now, 40 years after the fact.
“… household debt has near doubled in 30 years …”
EDIT: Meant 40 years.
…and this post was intended for Gregg’s link to Paul Craig Roberts…..ignore it Doug.
1,4% was in line with the Moore model, and in fact, perhaps a bit above. Judging form the chart, they were predicting 1.3%. Last month the actual number came in above their forecast as well. The real question will be whether they are right about what happens later in the year:
How much is energy prices in this model? It looks like they are expecting a surge in energy prices; a flip side of the first part of the graph.
It’s not really an initiation of high inflation. It’s mostly a technical offset for unusually low prices during the bottom of the pandemic. Remember gas at $1. 499? When gas this year is at $2.39, that’s not going to be a favorable comparison.
Thanks for the explanation Carl
Thanks….interesting chart.
I tend to think that initiation of high inflation, as this chart predicts, is dependent on political actions. But nothing Washington is currently doing is causing high inflation, yet. What is the strongest thesis for high inflation soonish?
Helicopter money is coming, for one thing. There are projections for a higher crude price, but nothing outrageous, AFAIK.
Thanks. Seems the $1400 helicopter money should be priced in now.
One argument I’ve read that there’s no significant inflation (outside of speculative assets) is that the short end of the yield curve is barely off the ground … it’s just back to where it was 12 months ago, and bonds don’t lie.
It can’t be priced in…..not like most things, imho…..until the $1400 is spent, it’s just an idea…..it could be spent on rent, or food, or necessities…..it could be put under the mattress and never spent at all. When it goes into trading accounts and gets spent for stocks…..that makes buyers….who currently are on the sidelines. That is when you can price it in…..when it turns into a mob of fomo-fueled top-buyers who will become the greater fool for somebody smarter who is headed for the exits.
Makes sense. It would be interesting to know how many kids can talk their parents into rolling some stimulus money into Bitcoin. I’m convincing myself that Bitcoin is now the spinal cord and epicenter of the Everything Bubble. Crypto is new enough, and confusing enough, that people can Truly Believe it’s different from dotcom stocks or real estate — it’s “a new paradigm.” Perhaps the real buying frenzy is just getting started.
My teen says we should get one Monero for $150 … oops two days later it’s now $170. I don’t know what a Monero is, but I’m pretty sure it’s useless.
Monero is great for offshoring money….as of now, it is the most private of private cryptos, AFAIK. In time, it is sure to be made completely illegal….ultimately it can and (might) threaten the banking monopoly.
Those who believe the government can’t hack it…and aren’t concerned with the law, particularly, think Monero is the future of off-the-rez digital money. And they could be right….but it’s incompatible with eh existing banking paradigm, imho.
Let’s send out OJ to look for the missing inflation.
It’s nice to have the world’s reserve currency. Don’t ever have to work again.