The St. Louis Fed, AKA Fred is abysmally late updating its data feed. I have too many charts to update manually, so here is a synopsis instead of my typical detailed report.
CPI Flat for May
- The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in May on a seasonally adjusted basis, after rising 0.3 percent in April
- Over the last 12 months, the all items index increased 3.3 percent before seasonal adjustment.
- More than offsetting a decline in gasoline, the index for shelter rose in May, up 0.4 percent for the fourth consecutive month.
- The index for food increased 0.1 percent in May. The food away from home index rose 0.4 percent over the month, while the food at home index was unchanged.
- The energy index fell 2.0 percent over the month, led by a 3.6-percent decrease in the gasoline index. The index for all items less food and energy rose 0.2 percent in May, after rising 0.3 percent the preceding month.
- Indexes which increased in May include shelter, medical care, used cars and trucks, and education. The indexes for airline fares, new vehicles, communication, recreation, and apparel were among those that decreased over the month.
- The all items index rose 3.3 percent for the 12 months ending May, a smaller increase than the 3.4- percent increase for the 12 months ending April.
- The all items less food and energy index rose 3.4 percent over the last 12 months. The energy index increased 3.7 percent for the 12 months ending May. The food index increased 2.1 percent over the last year.
Owner’s Equivalent Rent and Rent of Primary Residence
I expected a flat CPI, but not the way we got it.
Owners’ Equivalent Rent and Rent of Primary residence were each up another 0.4 percent in May.
That marks the 33rd consecutive increase of at least 0.4 percent for both.
I expected a flat CPI this month with rent and OER pulling back a bit. Had they fallen, we would have had a negative CPI.
At some point this year, I believe rent will abate. If not, the Fed is going to have one heck of a time bringing down the year-over-year CPI currently 3.3 percent.
The Bloomberg Econoday consensus estimate was 3.4 percent as were many others. My forecast based on a combination of energy and shelter was 3.3 percent with an outside chance of 3.2 if both were good.
Multi-Family Housing Completions
Part of my reason for expecting improvement in the CPI was based on the idea that 2024 Will Have the Most Multi-Family Housing Completions in History
I may post some charts if the St. Louis Fed updates its data. I have too many to enter manually.
It’s silly to be at the mercy of a data feed from the Fed, but that is the spot I am in.
Apologies.
Mike, do you do broadcast interviews? Bill@billmeyershow.com
There is a wage-rent spiral going on, sustaining “high” levels of inflation. It is as clear as day when piecing together all the different data sources out there. I don’t see anything stopping it without some form of direct government intervention. People will not take jobs if they don’t feel their wages are going to adequately cover rent, period. This is a no compromise point of contention for job seekers, and employers have to either yield or go without employees. On the other hand, there is nothing to stop landlords from raising prices indefinitely, since it is cartel price setting at this point through “independent” third party software.
Downvote me all you want. Three years of price action backs me up. And don’t expect it to change on its own, because it won’t happen.
do you have a source for price fixing independent third party software? that would be interesting to those of us considering adding investment in multifamily real estate in overbuilt parts of the country
This is awesome!
Liquidity Bubble generated by Fed MMT policy as consequence of GFC and Covid has not yet worked its way thru economy.
Equities at all time highs, CPI still way above announced rate of increase, whether they are true or not employment figures still strong.
Fed is in no way, shape or form going to cut or even come out with a dovish statement.
Was just at a friends house he had a garage 6 inch thick slab poured.
4000 psi grit mix with wire mesh and some r-bar. Came in at 10 bucks a sq. ft.
Same type job three years ago was 35% less.
My electrician buddy went out gave four estimates to replace house services.
Three of the four had no money to pay for it. Since they need to get done people are considering taking out a finance loan.
Go to work. Give all your money to the landlord and walmart. You’re just the middleman.
Sounds like one big happy family.
Go to work. Give all your money to public servants – federal, state and local. Borrow to pay your landlord. Put Walmart on your credit card and pray. You are just a feudal serf in the service of a gerontocracy overlaid on top of a corrupt and failed permanent bureaucracy.
… fixed it for you
How else is the G supposed to centrally mismanage the US economy, if not by ruthlessly encouraging massive, dubiously financed purchases (Hello, ZIRP) and then gyrating interest rates (Hello, Money Printing) for decades.
As the Soviet citizenry said in the later 80s / early 90s: “the government pretends to tell us the news, and we pretend to believe what they say”
We have reached the point in the marriage between the government and the governed where the husband comes home late with lipstick on his collar and a smirk on his face and tells his wife with a sincere look that he did not spend the night at the strip club. The wife says OK. The divorce lawyers sharpen their knives. Everything is fine!!!
Mish might even believe that St Louis FRED “accidentally” got their numbers in late. That or the Fed bureaucrats realized the true importance and true economic value of updating total nonsense.
Now that stocks are overpriced, the Fed can hike rates to whip inflation.
I think a rate cut would just spike inflation again.
While inflation remained mild, it was hard to spot that the government statistink is a fabrication.
Now, with inflation out of control, it’s difficult to hide, but will stick with the model anyways.
around here (midwest), prices for everything still creeping upward… fuel, food, rent, and especially services.
we bid out demolition, installation, delivery, disposal & maintenance services in the past six weeks, and ALL of the bids came back 25-50% higher than last summer. none of the subs could promise/commit legal payroll labor, which means all of them are using illegal day-labor.
materials cost approx. 5-10% higher than last summer. some items were actually cheaper, but others were a lot more expensive.
not sure how much longer we’ll “play by the rules”… nobody else is, and law enforcement is non-existent in any case. trades now operating just like mexico/central america, i.e. regulation/laws ignored + under-the-table accounting.
home prices (seller’s ask) still ridiculously high. this region has been losing population for decades… iow, sellers are delusional, imo.
purely anecdotal, but I trust real numbers i see firsthand more than the politicized unrevised gooberment numbers that are inexplicably trumpeted by “the media”.
Yes, I see these government numbers uncoupled from reality. I had to raise rents because insurance, repair, etc costs going up. My tenants didn’t complain as they know they are below market. Food at a local grocery is 25% up from what it was before. In some cases 50-100% up!
Jimmy Carter’s 2nd term has been hard on everyone.
Jimmy Carter did a few things right and a few things wrong. He inherited the fallout from Vietnam, Watergate and the LBJ spending binge impact on inflation.
It took the USA two decades to pay the full cost of LBJs “great society”, vast increase in Vietnam, vast increase in Medicare/medicaid, etc. Carter took a lot of blame that was really LBJ’s incompetence.
Not saying Carter was great (he wasn’t), but he took the blame for his own faults plus LBJ’s faults. Nixon did his own swan dive. Ford ate nachos and watched football.
Biden is a whole new level of incompetence and stupidity and corruption, with senility on top
All those things were nothing next to the Oil shock when prices quadrupled.
The US government devalued the dollar to pay for great society and vietnam… the saudis refused to accept devalued dollars for their oil.
The “oil shock” is the media version of events. The truth is it was a USD devaluation shock and everything else repriced to reflect the devalued dollars.
The great society spending binge was not cost free, the accounting just took a while to reflect the USA’s loss of wealth
FJB and F-LBJ too
The difference is Jimmy Carter was, is a good and decent man. I may have not have been as concerned about things back then in my younger days, but he wanted want we all wanted its just we disagreed on how to get there.
Biden, todays Democrat party does not want what the majority of Americans want, and that is putting it mildly.
Really, F that whole party.
Great info, thank you for sharing. I didnt hear you say anything about insurance. Business insurance, be it liability, auto/business policy or workers comp are ip 12 to 18% here
insurance up 15-20% across the board since 2022.
The US economy is a Vegas stage act with a magician levitating a lady in mid air. You know it’s all fake and an illusion but you can’t explain exactly how.
The half naked levitating lady in Vegas is pretty. Its fake but its pleasant.
Now picture half naked Biden and half naked Kamilla. Its fake and its stomach churning
An eerie chart https://cms.zerohedge.com/s3/files/inline-images/bfmE232.jpg?itok=6zVa4zWX
That chart shows what I’ve been saying for some time now. We will get to a point where everyone will pat themselves on the back and think high inflation is over, the fed cuts then inflation roars back up again.
The key issue is the labor depletion: millions of boomer retire/expire every year and there is no solution to replace them. I’m still waiting on robots and AI to fix my plumbing and HVAC but no luck.
It is possible but the causes will be completely unlike the 1970s early 80s
We are approaching the global sovereign debt crisis. I am not sure there is a playbook for this as I do not think we have ever had all global economies of substance over 300% Debt to GDP as we do now
Initially, like next 9 months I believe we see the long bond drop to at least 3%, maybe 2% in a year. You then have a new government coming into place, assuming we have elections at all
There is a non-zero risk we do not
All will depend on the outcome of whoo the Security State Blob installs in office in the Executive and the Legislative branches, where they will control most outcomes now
I thought the bang point was 10-15 years out
Probability has soared that it is now within 5
Stretch and mis-match axes enough and anything can overlay!
I do agree inflation isn’t over yet unless HfL continues (Higher-for-Longer).
So do you still think the Fed will cut in July?
I wonder if the rate cuts from ECB and BOC will generate inflation in those countries which cascade back to the U.S.
It’s turtles all the way down and inflation all the way up.
Very hard with rent as it is.
I called the numbers this month accurately but not the way.
But possible if OER magically sinks next month
Barring a surprise in the data, it’s hard to see a July cut. Futures markets are saying it’s fairly unlikely. ~1 in 9 odds. Options markets would give higher probabilities to a cut.
Rents are up because the underlying expenses are up. Home owners insurance is STILL climbing.
https://data.bls.gov/timeseries/CUUR0000SEHD?output_view=data
For property owners those increased costs are passed onto the renters, I know because I’m the one doing it.
Property taxes are also up with the sky rocketing valuations. So when home prices go up, insurance follows and those are passed onto consumers.
The cost of repair and maintenance, labor is also up. All of it gets passed on to renters, there is no free lunch.
I always suggest people think in terms of “ecosystems” when it comes to this kind of stuff so they don’t miss the forest by looking at a single tree.
Correct. Renters pay everything homeowners (insurance, taxes, maintenance) pay plus a small profit to the owner.
That’s why when trying to work out CPI they should stop with OER (owner equivalent rent) and instead ask what the mortgage payment + rent + insurance is and figure out how much that increases for homeowners since that’s a proxy for a large part of the rent that renters pay.
All true. Especially the labor costs for maintenance and repairs.
Rents will fall when demand for rental units falls. A weakening economy will do that. There are plenty of empty bedrooms in parents’ houses.
Natty and cool … https://www.eia.gov/todayinenergy/detail.php?id=42815
WTI hit a low $73. Now we approaching $79. Do a second round of sanctions against Russia, F-16s etc. put price pressure on crude? And then gas? As we enter the summer driving season. So drop in energy for CPI may be very temporary. Adding in that Natty traded from $2 to $3 in a little over a month. No price pressures there as we go into air conditioning season. We are not Paris.
Renters will decide this election
Yes!
Renters will be told what to think based on property tax and insurance increases. They aren’t deciding anything themselves.
Heads, property taxes go down. Tails property maintenance stops and toilets back up until the renters get an attitude adjustment.
Either way, renters are not in control of anything
FJB
Its about votes, not renters ability to change rent.
those votes are based on the reality that they must pay higher rent …. either higher money costs paid or lower maintenance received. They will be paying a lot more, or getting a lot less.
That is what determines renters votes.
You go ahead and believe they will vote based on rainbows and unicorns. I’m going with renters voting based on their wallets
FJB
Every multi-family “opportunity” in the last year is priced to perfection from a buyers viewpoint. If the tenants find better paying jobs and if they accept higher rents and if property taxes stabilize and if insurance costs stabilize … then it might have a positive yield. If any of those things turn out less than perfect, the property will lose money and something will have to give.
Hmm, I wonder what percentage of people who rent also vote? I am guessing it’s quite low.
It is much lower but …
The shift has gone from something like 80% Democrat to a Republican majority!
Not just 18-29 but 18-35
Trump is also polling 18 percentage points higher in Black Men, about 6% black women, both vs 2020
Biden won’t win if these percentages hold
C’mon, Mike – join the winning team! When Biden was declared the winner by the media in 2020, the libs surrounding me shot off fireworks. I’ll be buying fireworks this time. I’ll go back to hating all politicians* including Trump the day after I vote for him.
* except Thomas Massie.