Once again the BLS tells us inflation is under control. Once again, close inspection suggests something else.

Let's investigate, starting with the BLS Consumer Price Index Report for December 2019.

  • According to the BLS, the Consumer Price Index for All Urban Consumers (CPI-U) rose 0.2 percent in December on a seasonally adjusted basis after rising 0.3 percent in November.
  • The gasoline index increased 2.8 percent in December. The index for all items less food and energy rose 0.1 percent in December after increasing 0.2 percent in November.
  • The All Items index rose 2.3 percent over the last 12 months. So did the index for all items less food and energy, the same increase as the periods ending October and November. The food index rose 1.8 percent over the last 12 months, while the energy index increased 3.4 percent.

CPI Month-Over-Month and Year-Over-Year

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Hooray! Inflation Tame

Hooray, inflation as measured by the BLS is only up 2.3% from a year ago.

The Bloomberg consensus estimate was 0.3% month-over-month so 0.2% looks tame. The core inflation measure (CPI excluding food and energy) rose only 0.1% vs the expected 0.2%.

But does your basket match this?

CPI Percentage Weights

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It's when you dig into details you find disturbing trends, like the lead chart and this.

Medical Care Costs Month-Over-Month

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Medical Care Cost Detail

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On the rare occasions the month-over-month price drops, costs the following month tend to jump 0.6% to 0.8% or higher.

Medical Insurance Quotes

I posted these quotes last month, but it's worth another look after this gloomy report.

I went to NerdWallet for some quotes. My base case was a husband and wife making a combined $100,000, both aged 60, non-smokers, with no dependents.

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Same Couple Making $60,000

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Synopsis

  • For a couple, aged 60, making $100,000 per year, "affordable" care costs $19,776 right off the top. Then there is a max out of pocket expense of $8,150 per person. Yes, per person.
  • For a couple, aged 60, making $60,000 per year, "affordable" care costs $3,804 right off the top. Then there is a max out of pocket expense of $8,150 per person.

The BLS tells us, medical care services is only 6.97% of the "average" household expense.

Average includes all those on medicaid and medicare. It also includes those on company plans.

It does not count corporate costs. Why? The BLS is only concerned with "consumer" prices. No other measures of inflation are important.

Averages take into consideration the average person does not go to the hospital.

Heaven help you if you actually need help.

What About Home Prices?

Good question, especially if you want to buy a house.

The BLS Relative Importance Table shows housing is 42.20% of the CPI.

Owners' Equivalent Rent is the largest component in the CPI, accounting for a whopping 24.05% of the CPI.

The Owners’ Equivalent Rent (OER) Calculation method is absurd.

The expenditure weight in the CPI market basket for Owners’ equivalent rent of primary residence (OER) is based on the following question that the Consumer Expenditure Survey asks of consumers who own their primary residence: “If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?

Home Prices vs OER vs Earnings

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Already have a home?

If not, don't expect to find an affordable one. Sorry. You simply do not fit the BLS mode where averages rule.

BLS Model vs Reality

If you are in school, looking to buy a home, buying your own health care, or even having insurance but getting sick, then your measure of the CPI will be dramatically different than what the BLS tells you.

If you are 65, on Medicare, and own your own home. Congratulations. You fit the BLS CPI mold perfectly!

Election Note

This issue alone could easily cost Trump the election in 2020.

Trump did not cause this setup, but he now owns the problem and did not fix it.

Anyone buying their own insurance might easily listen to charlatans promising "free" health care,

Mike "Mish" Shedlock

CPI vs Reality: Medical Care Costs Soar Out of Control

The BLS reports once again that inflation is tame. Reality depends on your needs.

Another Surge in CPI Medical Care Costs

The cost of medical care services jumped 0.9% in August and is up 4.3% from a year ago.

BLS Reports Tame Inflation as Medical Costs Soar Out of Sight

The BLS says the CPI rose 0.1% in January. Year-Over-Year the CPI is up 2.5%. Your experience is sure to vary.

CPI-U +0.2%, Core +0.1%: Medical Care and Shelter Components Highly Questionable

The CPI came in under expectations across the board. I question shelter and medical components.

CPI Benign but Medical Services and Rent Squeeze Continues

Consumer prices were flat in September and core CPI rose less than expected. Housing and medical services are problems.

Good News For Inflationists: Medical Costs and Rent Surge; Mini-Stagflation Coming Up?

Hip, hip, hooray! The CPI is up more than expected, led by a huge 1.1% month-over-month surge in medical care supplies.

CPI Shows Sharply Rising Medical Costs; Huge Obamacare Hikes Planned

The CPI came in exactly in line with the Bloomberg Consensus option today.

Employment Costs Rise 0.7 Percent in the First Quarter: Spotlight on Health Care

Employment costs continue to rise at a steady pace, up 0.7 Percent in the fourth and first quarters.

Explaining the High Cost of US Health Care: No Skin in the Game

Costs are expensive because there is almost no skin in the game. Graft has taken over.