Month-Over-Month Details
- The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4 percent in February on a seasonally adjusted basis, after increasing 0.5 percent in January
- The index for shelter was the largest contributor to the monthly all items increase, accounting for over 70 percent of the increase
- The food index increased 0.4 percent over the month with the food at home index rising 0.3 percent.
- The energy index decreased 0.6 percent over the month as the natural gas and fuel oil indexes both declined.
- The index for all items less food and energy rose 0.5 percent in February, after rising 0.4 percent in January.
- Categories which increased in February include shelter, recreation, household furnishings and operations, and airline fares.
- The index for used cars and trucks and the index for medical care were among those that decreased over the month.
Hot, Warm, Cool, or Cold
Looking at this data in isolation, there is nothing one could point to that would possibly induce the Fed to do anything but accelerate the pace of rate hikes, especially given the fact the Fed ignores food and energy.
Yet, here is a headline I captured this morning: “U.S. stocks are rising after inflation data fuels hopes on lower rate hikes.”
I read the report and it was nonsense about the CPI only going up 0.4 percent when last month it rose 0.5 percent. Well, the preceding two months were 0.1 percent and 0.2 percent.
Shelter Remains Hot
Shelter Notes
- Shelter comprises 34.39 percent of the CPI
- Rent of primary residence is standard rent (not owner occupied), unfurnished without utilities.
- Owners’ Equivalent Rent (OER), is the estimated price one would pay to rent one’s own house, unfurnished and without utilities. It is the single largest CPI component at 25.39 percent.
Price of Rent
The price of rent has gone up at least 0.7 percent for 9 consecutive months. Shelter has gone up at least 0.6 percent for 10 consecutive months.
CPI Year-Over-Year
CPI Year-Over-Year Details
CPI Year-Over-Year Percent Change
- The all items index increased 6.0 percent for the 12 months ending February.
- The all items less food and energy index rose 5.5 percent over the last 12 months, its smallest 12-month increase since December 2021.
- The energy index increased 5.2 percent for the 12 months ending February
- The food index increased 9.5 percent over the last year.
- The shelter index increased 8.1 percent, the highest since June 1982.
Has Rent Really Stabilized?
My answer In October was no, last month no, and my answer today is still no.
Mish Flashbacks
- Oct 31, 2022: Rent Prices Have Declined Two Straight Months, But What Does It Mean? Rent prices are declining month-over-month but don’t read too much about inflation into the decline.
- December 8, 2022: Ignore the Pundits, Don’t Expect Big Declines in the Price of Rent. The price of rent appears to be falling rapidly. But some of that is seasonal, the rest is likely a mirage.
- January 5, 2023: National Rent Prices Decline Again, But Reports Are Very Misleading. Apartment List reports the fourth consecutive drop in apartment rent prices but that may not translate to your next lease.
- February 2, 2023: National Rent Prices for New Leases Drop for the 5th Month. The price on new apartment leasers declines again, but when do existing renters get a break?
On March 7 I asked The Fed Chair Puts a Spotlight on Rent, Has Rent Really Stabilized?
We can easily see the answer is still no judging from another 0.8 percent rise month-over-month in the shelter index.
False Dawns
All these “rent is declining” false dawns have been wrong for three reasons.
- They are based on new leases, not existing leases.
- They report increases all at once whereas the BLS smooths things out over a 12-month period due to the fact that not all leases renew in the same month.
- Seasonality
In the months ahead we may finally see rents ease due to the fact there are a record number of apartments under construction. Just don’t expect to see declines.
Note that new leases have bottomed and are heading back up.
The stock market is up as I type, but it is about a Fed bailout of banks, not inflation data.
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
#1 “there was a time when monetary policy aggregates were important
determinants of inflation and that has not been the case for a long time.”
now, M2 [money supply] does not really have important implications. It is
something we have to unlearn.”
just very, very low”.
Contrary to Nobel
Laureates Dr. Milton Friedman and Dr. Anna Schwartz’s “A Program for Monetary
Stability”: the distributed lag effects of monetary flows (using the truistic
monetary base, required reserves), have been mathematical constants for >
100 years.
Dr. Richard G. Anderson
says: “reserves were driven by payments”.
suffer bank credit contraction. SVB’s deposits get redistributed in the system.
Lyn Alden points this out with the division of small vs. large banks.
commission was established on Member Bank Reserve Requirements. The commission
completed their recommendations after a 7-year inquiry on Feb. 5, 1938. The
study was entitled “Member Bank Reserve Requirements — Analysis of Committee
Proposal” its 2nd proposal:
deposits”
After a 45-year hiatus, this
research paper was “declassified” on March 23, 1983. By the time this paper was
“declassified”, Nobel Laureate Dr. Milton Friedman had declared RRs to be a
“tax” [sic].
Contrary to professional
economists, banks aren’t intermediaries. Banks don’t lend deposits. Deposits
are the result of lending. In the circular flow of income, all bank-held
savings are lost to both investment and consumption.
not non-borrowed reserves as Paul Volcker found out. Volcker targeted
non-borrowed reserves (@$18.174b 4/1/1980) when total reserves were (@$44.88b).
Monetary policy should delimit all required
reserves to balances in their District Reserve bank (IBDDs, like the ECB), and
have uniform reserve ratios, for all deposits, in all banks, irrespective of
size (something Nobel Laureate Dr. Milton Friedman advocated, December 16,
1959).
Financial Times – As Sheila Bair said: “It
should replace the shock and awe of major interest rate hikes with new targets
based on money supply, and aggressively shrink its portfolio, selling
securities at a loss to do so, if necessary.”
JULY 22, 2022, The writer is a former chair of the US Federal Deposit Insurance
Corporation and a senior fellow at the Center for Financial Stability
Fed can keep unloading bonds even when officials cut interest rates at some
future date.”
Economic Adviser: Research Division, Federal Reserve Bank of St. Louis, Working
Paper Series
Rates Don’t”
But Powell thinks banks are intermediaries, lending savings to borrowers.
sterilize over-liquidity and get the money supply under control in order to
prevent inflation or over-heating”
Even after Credit Suisse stopped financing hedge funds following the Archegos implosion in March 2021, the equities business remained a key part of its investment bank revenue.
Credit Suisse profits in equities by making a cut on large volumes of shares it trades on behalf of clients, and by structuring derivatives, or complex financial products, which are often sold to more sophisticated wealthy customers.
The plunge in fourth-quarter revenue included a sharp decline in derivatives, according to the two of the people with knowledge of the matter, as customers shunned Credit Suisse after its credit rating deteriorated.
In November, S&P Global Ratings downgraded the bank’s long-term rating to one step above junk, following revisions on some ratings from other credit agencies.
The downgrades damaged the bank’s ability to lure clients who instead looked for what they considered to be safer and more attractive alternatives, three equities traders who structure derivatives at rival lenders said.