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Core CPI Jumps the Most Since 1982 Led by Used Cars and Trucks

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24 comments on Core CPI Jumps the Most Since 1982 Led by Used Cars and Trucks

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CPI Year-Over-Year

CPI Month-Over-Month Details 

  • The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.8 percent in April on a seasonally adjusted basis after rising 0.6 percent in March 
  • The index for used cars and trucks rose 10.0 percent in April. This was the largest 1-month increase since the series began in 1953, and it accounted for over a third of the seasonally adjusted all items increase. 
  • The food index increased in April, rising 0.4 percent as the indexes for food at home and food away from home both increased. 
  • The energy index decreased slightly, as a decline in the index for gasoline in April more than offset increases in the indexes for electricity and natural gas. 
  • The index for all items less food and energy rose 0.9 percent in April, its largest monthly increase since April 1982. 
  • Nearly all major component indexes increased in April. Along with the index for used cars and trucks, the indexes for shelter, airline fares, recreation, motor vehicle insurance, and household furnishings and operations were among the indexes with a large impact on the overall increase. 

CPI Year-Over-Year Details

  • Over the last 12 months, the all items index increased 4.2 percent before seasonal adjustment. This is the largest 12-month increase since a 4.9-percent increase for the period ending September 2008. 
  • The all items index rose 4.2 percent for the 12 months ending April, a larger increase than the 2.6- percent increase for the period ending March.
  • The index for all items less food and energy rose 3.0 percent over the last 12 months, a larger increase than the 1.6-percent rise over the 12 month period ending in March. 
  • The energy index rose 25.1 percent over the last 12-months, and the food index increased 2.4 percent. 

Other than the jump in used car prices, and perhaps not even that, most of this should have been expected.

Year-over-year comparisons were against the April 2020 Pandemic low.

Next month is another easy comparison that will impact the year-over-year numbers. 

This does not impact my view that the bulk of the inflation jump is behind us. 

For discussion, please see Add David Rosenberg to List of Those Who Believe Inflation is Transitory

Again, we are talking about inflation as measured with does not count home prices and asset bubble.

Mish

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Mike Shedlock

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FromBrussels
FromBrussels
2 years ago
…yeah yeah, CPI jumps but the FED couldn t care less, so why bother ?   ….what really bothers me is that the ‘likes’ have become anonimous on the new blog,  how am I going to reciprocate know as far as the 2 or 3 I get (per year) are concerned ?  To like or not to like THAT s the question !  …..CPI he says…. 
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Scooot
Scooot
2 years ago
Reply to  FromBrussels
“what really bothers me is that the ‘likes’ have become anonimous on the new blog,”
That’s interesting, I thought they’d always been anonymous, never known who they were from or where to look.
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Scooot
Scooot
2 years ago
Reply to  Scooot
Agreed, the Fed wants CPI to rise, and it doesn’t want it to be transitory. If they were to say it wasn’t transitory they’d have failed in creating employment by creating inflation. 
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Eddie_T
Eddie_T
2 years ago
Reply to  FromBrussels
I noticed that too. That like was from me btw.  🙂
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TexasTim65
TexasTim65
2 years ago
Mish, what do you think they are going to do at the end of this year in terms of massaging the CPI numbers for inflation.
The reason I ask is that a lot of things are tied to inflation (social security raises, union pensions, city/state salaries which affect property tax increases etc). Even a lot of corporate America gives out standard COLA increases to employees. By massaging the numbers for a lot of years to achieve 2% inflation the Gov’t has managed to keep those payments in check at ~2% a year. But if these big numbers continue for a few more months it’s going to be hard to convince those people that they are ‘bogus’ (esp if you’ve bought gas or lumber or a car or a number of other things lately) due to easy 2020 comparisons and that they should only get 2-3% cost of living increases. The whole thing can easily spiral out of control if people start demanding 5-6% or more COLA.
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davebarnes2
davebarnes2
2 years ago
So, if not buying a car, do I care?
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TexasTim65
TexasTim65
2 years ago
Reply to  davebarnes2
You will once everyone starts demanding 5-6% COLA raises for pensions, social security, property taxes etc. It may not matter in the next few months but next year could start a spiral out of control like in the 70’s.
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Doug78
Doug78
2 years ago
Short used cars and trucks and go long new ones.
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Eddie_T
Eddie_T
2 years ago
Reply to  Doug78
Can you short Dogecoin?
Just kidding. I don’t think you can borrow it from any of the crypto banks unless something has changed recently. I really want to short Tesla and Bitcoin, but it’s probably the financial equivalent of stepping in front of a moving train. I learned my lesson on derivatives. I might join @PecuniaNonOlet in selling a naked put here and there, but that’s my limit on schniztelgruben.
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Carl_R
Carl_R
2 years ago
As you astutely pointed out, QE works through psychology. When the Fed announces QE, the market hears that money is being poured in, and the psychology keeps the market moving higher, even though the QE itself might not have had much effect. Inflation is very, very much the same. Yes, there are mechanical actions that cause inflation. In this case, the high numbers are mostly due to artificially low prices a year ago, and perhaps partially due to the excessive government deficits. However, inflation is also caused by psychology. I very well remember the late 70’s and early 80’s. Inflation was expected. Businesses raised their prices not because of price increases, but proactively, trying to stay ahead of inflation. Workers demanded raises for much the same reason.
So, the question is, will the Mar-May numbers create a new psychology of inflation? Reading the comments on this thread, the answer is maybe. Many people have been saying “all this spending will lead to inflation” for a long time, and it hasn’t happened (which was your very correct prediction). Well, now it is possible that this burst of inflation may lead to a change in psychology, and the inflation may become self sustaining. Only time will tell.
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Eddie_T
Eddie_T
2 years ago
Reply to  Carl_R
I think you make a good point on the psychology. I don’t think the charts are wrecked on anything as of today’s close, but if we don’t see new highs within a few days, I could call this week the first sign I’ve seen of real topping behavior, speaking from a technical standpoint. For several reasons, I expect stocks to rebound very strongly…but a dead cat bounce here would begin to change my thinking.
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Carl_R
Carl_R
2 years ago
Reply to  Eddie_T
The RUT is often changes direction before the Dow. The RUT chart looks significantly more broken than the primary indexes.
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Carl_R
Carl_R
2 years ago
I am in concurrence that this just a baked in increase, based on the extremely low prices a year ago. I posted this on your other thread, but thought I should repost it here, with the addition of the Moore “prediction” from last August, which shows that there is nothing at all unexpected here. This increase has been baked in for quite some time.
The Moore Inflation Predictor was dead on at 4.2% for May. A I have
pointed out in the past, it is not a “prediction” at all, but merely a
mechanical calculation of baked in results. So, they “forecast” the high
numbers for Mar-April-May as early as last August, based on the
artificially low prices during Mar-May of 2020. Their current forecast
(which needs to be updated to May), shows inflation trending down from
here, back towards the Fed target of 2%:
Here is the Moore “prediction” from last August:
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Carl_R
Carl_R
2 years ago
Reply to  Carl_R
Since the 4.2% number was for April, the above post should have said that the 4.2% number matched the expected peak for May, and was a month early.
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Eddie_T
Eddie_T
2 years ago
At the risk of sounding xenophobic, I think used car and truck prices are driven by immigration in a border state like mine. Used cars, and more especially pick-up trucks, have been priced very dear in recent years, and that’s what’s behind it. Nobody lives here long without wheels, and people with decent credit have been buying new for the most part, because interest rates are low.  I have friends in other states who still buy used to save money, but that strategy is hard to justify here.
We knew this was going to be a headline story, right? Y.O.Y off last year’s numbers had to look scary. It’s a fake-out. Not sure about the long term, but I’m not ready to say CPI is really going to get out of control. We’ve just barely started to monetize debt, and that part of the debt cycle is still left to play out.
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Carl_R
Carl_R
2 years ago
Reply to  Eddie_T
Used car prices are also no doubt being driven by a decline in people willing to use public transportation.
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Casual_Observer
Casual_Observer
2 years ago
Reply to  Eddie_T

Maybe people cant afford new cars Eddie. Have you seen new car prices lately ? 

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dbannist
dbannist
2 years ago
Reply to  Casual_Observer
Yeah, around here they are marketing a 65k F-150.Who on earth spends 65k on an F-150?  Not me!  I’ll be lucky to spend half that much on cars during my entire life, let alone just one truck.  But….people are buying them.  Fools.
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Eddie_T
Eddie_T
2 years ago
Reply to  Casual_Observer
It depends. I was looking at Chevy Bolts, which are available here for 14-15K off the sticker price (which run in the high 30’s). 
I never owned a new car, btw, until I was in my 30’s and in my residency. I am not unsympathetic. I also made my kids drive used cars all the way through college. I was merely stating something that I’ve observed here locally, and I think I’m not too far off base.
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dbannist
dbannist
2 years ago
Reply to  Eddie_T
I’ve got 4 used cars and only two drivers.  Had 4 so that I’d always have a spare in case one broke down.  That way I don’t need to rush out and rent one since I have a spare.  Looks like I’ll be selling two of them soon.  I need the cash for another real estate deal soon anyway.  I think the used car increase is due to a number of factors:
1. People are afraid to use public transport
2. The chip shortage-new cars aren’t being made in the same numbers as before
3. Immigration has rapidly increased around where I live also (NC farming community).
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Eddie_T
Eddie_T
2 years ago
Reply to  dbannist
I’ve been there. Nothing wrong with that approach. I just (thankfully) don’t have to do that anymore.
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Maximus_Minimus
Maximus_Minimus
2 years ago
Reply to  Eddie_T
Not everybody likes to pick dog hair or try to suppress some pervasive smell, my experience with used cars. Since then, I’d rather buy a reasonable priced new car, than buy an old luxury car after a slob.
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Eddie_T
Eddie_T
2 years ago
Reply to  Maximus_Minimus
If you don’t like dog hair, then it probably wouldn’t be a good idea to consider one of my trade-ins. Wylie and Bandit have that Heeler double coat. Hell, it might even be a problem when we sell the house.
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shamrock
shamrock
2 years ago
If the government keeps handing out free money for nothing then this 4.2% is just the beginning. 
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