Skip to main content

CPI Year-Over-Year Drops a Bit, But Is it Believable?

The CPI rose again in April, more than economists expected. Year-over-year there's a small decline.
  • Author:
  • Publish date:
CPI data from BLS, chart by Mish

CPI data from BLS, chart by Mish

Key CPI Year-Over-Year Points

  • Year-over-year the CPI fell from 8.5% in March to 8.3% in April.
  • This is the first year-over-year decline since August of 2021 and only the second since October of 2020. 
  • The Fed has been hugely behind the inflation curve since early 2021.

CPI Year-Over-Year Details 

  • Overall: +8.3%
  • Less Food and Energy: +6.2%
  • Shelter: +5.1%
  • Medical Care Services: +3.5%
  • Rent of Primary Residence: +4.8%
  • Owners' Equivalent Rent (OER): +4.8%
  • Food and Beverages: 9.0%
  • Gasoline: 43.6%

CPI-Month-Over-Month 

CPI data from BLS, chart by Mish

CPI data from BLS, chart by Mish

CPI Month-Over-Month Details 

  • All Items: +0.3%
  • Food and Beverage: +0.8%
  • All Items Except Food and Energy: +0.6%

Economists Miss the Mark

The Bloomberg Econoday consensus was 0.2% month-over-month and 8.1% year-over-year vs 0.3% and 8.3% actuals.

Excluding food and energy, economists expected 0.4% month-over-month vs 0.6% actual. Excluding food and energy, economists expected 6.0% year-over-year vs 6.2% actual. 

All four economists' estimates were too low. 

Is Any of This Believable? 

That's the question of the day. Think about it for a second. 

There is one item that I believe. Food prices jumped 0.8% in April. 

My huge gripe is shelter. 

Rent and OER Year-Over-Year

CPI data from BLS, chart by Mish

CPI data from BLS, chart by Mish

Key Shelter Points

  • Year-over-year rent was only up 3.8% in January and 4.8% in April. 
  • Year-over-year OER was only up 4.1% in January and 4.8% in April.
  • OER is 23.816% of the CPI in April.
  • Rent is  7.278% of the CPI in April.

OER is the mythical price one would pay to rent one's own house from himself, unfurnished, and without utilities. 

Scroll to Continue

RECOMMENDED ARTICLES

Is rent and OER only up 4.8%? If you believe that, then the CPI numbers are believable. 

Otherwise, take 31% of the CPI, and factor in your rent increase to come up with your CPI. 

Calculating Your Year-Over-Year CPI

8.3 - (0.31 * 4.8) + (0.31 * Your Year-Over-Year Rent Increase) = Your CPI.

If you are one of the lucky few whose rent did not go up more than 4.8%, your CPI will be lower. 

What About Housing Prices?

Case-Shiller Home Prices, chart by Mish.

Case-Shiller Home Prices, chart by Mish.

My second beef is none of this factors in actual home prices.

We can also arrive at a much higher CPI if instead of rent we substitute actual home prices.

Factoring in home prices gives way to the debate that home prices are not a consumer item. 

OK, so what? 

Is inflation important or just consumer inflation?

Housing-Adjusted CPI Inflation Hits New Record High Dating to 1987

For an alternate CPI calculation that includes home prices, please see Housing-Adjusted CPI Inflation Hits New Record High Dating to 1987.

But no matter how you slice it, the Fed has blown another major asset bubble with a myopic look at alleged consumer prices that for most are not even correct. 

This post originated at MishTalk.Com.

Thanks for Tuning In!

Please Subscribe to MishTalk Email Alerts.

Subscribers get an email alert of each post as they happen. Read the ones you like and you can unsubscribe at any time.

If you have subscribed and do not get email alerts, please check your spam folder.

Mish