The CPI rose 0.4 percent in March. Rent is up another 0.4 percent in March with gasoline up 1.7 percent. Together, the pair was about half of the total rise. 
Yet Another Groundhog Day for Rent
I repeat my core key theme for over two years now. People keep telling me rents are falling, I keep saying they aren’t.
Rent of primary residence, the cost that best equates to the rent people pay, jumped another 0.4 percent in March. Rent of primary residence has gone up at least 0.4 percent for 31 consecutive months!
The “rents are falling” (or soon will) projections have been based on the price of new leases and cherry picked markets. But existing leases, much more important, keep rising.
Only 8 to 9 percent of renters move each year. It’s been a huge mistake thinking new leases and finished construction would drive rent prices.
The overall CPI and core CPI Joined the party this month, all rising 0.4 percent.
Let’s tune into the BLS Report for the more details.
CPI Month-Over-Month Details
- The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in March on a seasonally adjusted basis,
- The index for shelter, rent, and Owner’s Equivalent Rent (OER) all increased 0.4 percent.
- The energy index rose 1.1 percent over the month. Gasoline rose 1.7 percent.
- Shelter and energy contributed over half of the monthly increase in the index for all items.
- The food index rose 0.1 percent with food at home unchanged but food away from home index up 0.3 percent.
- The all items less food and energy, labeled the core CPI, rose 0.4 percent for the third month.
- The price of new and used vehicles declined in March.
CPI Year-Over-Year
CPI Year-Over-Year Details
- The CPI is up 3.5 percent from a year ago. That’s negative progress compared to the 3.0 percent registered in June of 2023, 9 months ago.
- Rent of primary residence and shelter are up 5.7 percent from a year ago.
- Food an beverage is up 2.2 percent from a year ago and perhaps as good as it gets.
- CPI excluding food an energy, a measure the Fed closely follows is up 3.8 percent from a year ago. That’s 1.8 percentage points higher than the Fed’s 2.0 percent target.
- Energy is up 2.1 percent from a year ago. Gasoline is up 1.3 percent from a year ago.
Energy has ceased contributing to the easing of year-over-year prices and I expect food will soon be in that category.
CPI Month-Over-Month Rent and OER
OER stands for Owners’ Equivalent Rent. It is the price people would pay to rent a house unfurnished, without utilities.
People keep repeating the myth that OER is based off the question “If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?”
That is false. Rather, that silly question is used to help set CPI weights, not prices. Prices are real measured prices of rent.
Real Measured Prices
Based on minor imputations, some claim OER is not a “real price”.
However, imputations border on trivial. The price is real.
CPI Weights and Other Issues
Rather than bicker over the measured price of OER, the far bigger issue is weight. OER is the single largest component of the CPI with a weight of 26.766 percent as of February 2024. Rent of Primary Residence is 7.655 percent. Shelter comprises 36.222 percent.
Do people pay OER? No they don’t. That’s what’s “unreal”, not the measured price. Roughly 64 percent own their own home with 36 percent renting.
The people who own their own home do not pay rent, they pay a mortgage. Most homeowners refinanced at lower rates, many at or near 3 percent.
Some economists want to strike OER from the CPI on this basis. The problem I have with that idea is “Inflation matters” not just “consumer inflation”. Home prices matter. Asset bubbles matter.
The CPI is totally screwed up as a measure of inflation and ignoring OER and housing bubbles does not address the issue.
The 36 percent of the people who do rent have been royally screwed by Fed policy that inflated assets, especially home prices, in turn causing rents to soar.
Refinancing put extra money in the pockets of homeowners every month. Rising wages with a constant mortgage rate fuels demand for goods and services and that pressures overall inflation.
This is why I expect inflation to be sticker than the Fed believes.
Flashback to Yesterday
Yesterday I noted Expect Year-Over-Year Inflation to Increase
Expect a year-over-year increase of 3.4 to 3.5 percent this month, but rent is a wild card.
There’s a decent number of monthly increases of only 0.1 percent or 0.2 percent comparisons coming up.
Unless the price of rent renewals collapses, it will be tough for the Fed to make much headway on year-over-year CPI reports especially if the price of energy shoots up.
I expected year-over-year CPI to rise because of a tough to improve upon figure of 0.1 percent a year ago.
Treasury Yields
Let’s investigate US treasury debt issuance by month and year.
For discussion, please see How Much Treasury Issuance Does the US Add Every Month to Finance Debt?
Pending in Congress
President Biden along with warmongers in both parties want to spend another $100 billion on Ukraine and Israel with no strings attached.
The Wall Street Journal constantly moans about deficit spending except for every warmongering project it sees.
That was my April 4 Hoot of the Day: WSJ Complains of Biden’s Inability to Use the Bully Pulpit
Child Tax Credit Expansion
On January 17, I asked How Much Will That GOP Deal on Child Tax Credits Really Cost?
Amazingly, House Republicans got suckered into child tax care credit expansion.
The unfortunate answer is $1.5 trillion over ten years. There’s now a chance this dikes in the Senate.
Regardless, Deficit spending has gone wild and the economy is not even in recession.
Those expecting the CPI to crash might wish to consider Biden’s energy policies, regulations, tariffs, free money handouts to students, and a big push for more unions and more government.
Everything is ‘transitory’ until you’re 6-ft under.
Very true!!!!!
took entire family out to dinner with mom – 8 adults
never thought I’d spend over $500 on dinner
If only the Fed would look at the existing serious measure of same-size house price inflation, and use it to monitor that form of inflation in the way that everyone involved in real estate does. Case-Shiller has been screaming Policy Error for a decade. The utility of the same house doesn’t change very fast but the price has gone up 50% in 4 years, doubled in 10 years.
The real measure of economic policy isn’t a GDP rate, an unemployment rate or an inflation rate. The real measure of policy is whether Mr. or Ms. Median can afford to live better that they used to, and the answer for a lot of people is NO.
It’s true that rising house prices aid sellers, but they also hurt buyers, and every transaction has both so policy shouldn’t favor either. Policy should favor productive prosperity, not rent-seeking or capital gains harvesting.
Policy inevitably favors those who make the policies.
Nothing changes much in the comment section here.
It’s an inflationary depression.
It’s the final days of the US.
It’s much worse than the inflation numbers suggest.
It’s the end of the world.
Get a grip. Forget whining and complaining. Forget politics. Work hard, save, invest. Look after yourself.
Another good day in the markets for those who pay attention to reality. I will continue to sell a bit more of my oil stocks into the strength. Cash position over 25% now. I might start to nibble at some of the beaten down sectors today. No rush though. Patience is a virtue.
YOU r THE BEST PAPA …….BRAGGER that is ….NOBODY wins all of the time ….so tell us about your failures occasionally, it would make you more likable ….
Recent failures. Gear, Tamarack, Surge. Loaded up at what I thought were the lows last year. Still underwater a bit. They are coming back quickly now. Plus I have been collecting the dividends. Patience is a virtue.
Everything … and I go mean everything … is going — to zero
But first everything will go to the moon.
Alice.
These figures are more headwinds against Biden winning in November.
“Deficit spending has gone wild and the economy is not even in recession.”
The concept of countercyclical spending is out the window. The ancient knowledge of governance has been lost to us, just like those woodworkers who used to be able to create ornate circular stairways by bending wood, a mere 30 years ago.
Our politicians are traitors and should be treated as such. They are greedy incompetent and corrupt and have betrayed its citizens.
And have learned the art of buying themselves re-election using debt money that has to be paid back by the very people that re-elect them ad nauseam. That applies to both sides of the congressional aisle.
FED Rates going UP !
Maybe when 50% of the population under 40 is priced out of qualifying for both a mortgage and a rental application, unassisted, then something will change. We are getting close to that threshold if we haven’t already passed it.
Possibilities to fix the shelter problem:
– close the border and start deporting illegals.
– create a jubilee year for building permits where
all are approved with no fee/exaction if built ‘soon’.
– change tax policy that makes it unattractive
for *investors* to own single family residences,
resulting in increased listings & lower prices.
– add your favorite solution to the list
Confiscatory estate taxes. The obscenely wealthy should not be allowed to pass on those ill-gotten gains to their spawn.
Exactly.
They should be forced to spend it on yachts, multiple international vacation homes. travel and food. Perhaps precious metals which sort of makes their money disappear.
“Their insane proxy war is a monumental debacle that spells calamity for the political establishments in the West, including the lying propaganda news media. Amid this desperation on a sinking ship of Titanic proportions, the NATO powers are going into full false-flag mode to create some frenetic distraction. The trouble for them is that we have been here many times before, and the whole world can see through their sordid playbook.” link to strategic-culture.su
The Fundamental flaw in thinking driving policy continues unabated.
That being Monetary policy acting in a vacuum is enough to control inflation.
This is a political economy and politics of the moment is what is driving policy actions.
Whether it be climate change as excuse to wreck affordable energy. Anti Farmer regulation to drive up food producers costs of operation.
Anti people policies causing lackluster birth rates.
Without addressing production of real goods and services, since Biden WH believes it possible to make bricks without straw as in olden times of Pharaoh, inflation will continue on-wards.
Have a nice day and get the Hell out of Debt while you still can. Inflation will get forced to be dealt with by Fed so as to prevent outright Banking collapse. When it does you do not want to be on wrong side scrambling to find a way to make your next debt payment.
Wrong. Pile on debt, but only fixed debt at acceptable rates. When it all goes to hell gather your stuff, mail them the keys, and get out of Dodge.
Now if there were a way to get the Hell out of Real Estate taxes I would agree.
It’s the never ending debt you can’t do much about in the US and mostly elsewhere.
Oil has been running hot, electricity is running hot and every day we lose 12,000 boomers to retirement which means every month there are 12,000 new social security recipients getting free spending cash. What could possibly go wrong with this setup of depleting labor and free money handouts?
If anyone is wondering why the recession hasn’t come it’s because boomer attrition has been replacing layoffs and will continue to do so for the next 5 years. Good luck with inflation fixed income folks.
“It’s turtles all the way down and inflation all the way up!”
It’s because the Govt that HATES YOU is spending an EXTRA $1 TRILLION above and beyond every 100 days and the FED and the people rejoice and celebrate the demise of future generations. That’s the fraud that is keeping the ponzi afloat. Let’s not confuse things
We might be running into some problems on the oil front….
Britain is producing the smallest amount of energy on record as a plunge in North Sea fossil fuels leaves the country more reliant than ever on imports. Read More
Mexican state energy company Pemex said its crude oil production in February hit its lowest monthly level in 45 years, as output of the key commodity remained far from the goals laid out by outgoing President Andres Manuel Lopez Obrador. Read More
Oil production in Alaska reaches lowest level in more than 40 years
Try to get your head around the idea that by 2027, US tight oil production might be 12 MM BOPD, not the 9 MM it is now, which is what cheerleaders say it will be, and that means we’ll actually have to find and extract 12 MM BOPD… before we can ever grow the new 3 MM. Man, that is a slew of new wells! Thats gonna take like…four times the HZ wells we’ve already drilled in the US.
Where? Read More
Why tax people when you can borrow from their children.
Taxation is “unpopular.”
The FED and Federal Govt HATE YOU.
Anyone pumping markets and “its gonna ramp” or “rate cuts” or “economy is great” or “quit complaining and make your own life better” all HATE YOU and are your enemy. They ONLY care about pumping their own bags.
The good news is your government is trying to slip another fast one by you and allow 3 letter agencies to continue to spy on you without a warrant and violate the 4th Amendment rights of any average American citizen that they want to. You know the Prism shit Snowden revealed and then was made a “traitor and bad guy” by the very same government that he caught illegally for criminally spying on Americans. And then the media Mockingbirded many to believe the bullshit lies. Yea that one.
Sleep easy tonight and the guy that said Ammo is the best hedge in these times is absolutely correct
There is much you say here that is true.
As there was another cargo ship incident just past Sunday evening in NY Harbor.
Ship had three tugs on it which when power failed required additional three tugs to get vessel under control. This had potential to threaten Verrazzano Bridge. very vital artery for city of NY. Must be just another one of those there coincidential thingies.
My take, Winds were very light Sunday and if they were blowing as they have in past, good chance Bridge would have gotten hit. NYC was saved by mother nature not because of competent people.
Why is warrantless search being supported by Congress? Most likely National Security threats are going well into Red Zone after the lawless Biden administration flooded US with people without documentation.
As the inflation driven depression devours even faster, the fed inflation supported equities are staring into the abyss of zero income except for more fed inflation, and of course deepening depression and social collapse.
That they are even talking about rate cuts with “super core” inflation re-accelerating (now more than 2x the Fed’s “target”) is complete insanity.
These clowns will have us in full-blown hyperinflation before the end of 2025.
Welcome to Zimbabwe.
Supercore is above 8% on a 3-month annualized basis. A lot more than double.
Peak = the “highest concentrations” …as demonstrated by the clustering correlation of plots on a scatter diagram.
From the unknown formula that I discovered > 40 years ago (I predicted both of Nassim Nicholas Taleb’s “Black Swans” i.e., unforeseeable events, the flash crash in stocks on May 6, 2010 and the flash crash in bonds on October 15, 2014.
Rates-of-change in money flows, volume times transactions’ velocity, equal RoC’s in P*T in American Yale Professor Irving Fisher’s trusitic “equation of exchange” (where N-gDp is a subset and proxy).
N-gDp is determined by the volume of goods and services coming on the market-place relative to the actual, transactions, flow of money. Roc’s in R-gDp serves as a close proxy to RoC’s in total physical transactions, T, that finance both goods and services.
Then RoC’s in P, represents the price level, or various groups of prices and indices.
All this market “noise” (random price action) will suddenly coalesce by June.
Ok. So what will happen in June?
Another eclipse.
No rate reduction and possible .25 increase depending on April and May figures.
This remarkable achievement of logic is almost as succinct as the ‘scientific’ explanations of the mRNA vaxes and the 3 WTC towers’ freefall collapses.
It’s no happenstance. The FED’s accounting is wrong. Draining the O/N RRP injected new money and new reserves into the payment’s system. The money stock can never be properly managed by any attempt to control the cost of credit.
OK.
I will manage the money stock properly.
For 10%.
So looks like stagflation.
Any ideas on the best investment opportunities for Stagflation?
Ammo
And marksmanship skills.
Especially for deer hunting … bada boom cha.
Bulgaria?
“Only 8 to 9 percent of renters move each year. It’s been a huge mistake thinking new leases and finished construction would drive rent prices.”
One of the biggest driver of submarket rents is new construction. In some submarkets, new construction is definitely driving rent declines. It’s just localized and disappears in the averages. There’s a reason institutional real investors highlight the new construction pipeline when they are looking a purchasing a property.
On renewals, people don’t have to actually vacate to get the benefit of competing rents on other properties. It’s leverage. Owners do proactively retard rent growth to be in line (within a margin) with new rents.
Are nominal rents about to decline? No. We definitely agree.
Is the growth rate in rents going to decline? Absolutely. 1) It’s not sustainable, and 2) New rents to impact renewal rents over time – they can’t diverge forever. This cycle is just unusually long, due in part to high single family home prices and high moving costs. Our forecasts are for a slow decline in rent growth over 2-3 years but still settling out at 0.5-1.0% above inflation.
The damage in housing has already been done. SO what if rents stagnate after going through the roof?
Biden tells us we’re not grateful for the wonderful economy. He needs to tell us what economy he’s referring to.
Imagine what inflation our corrupt government would report if they hadn’t massaged the numbers.
You can add another 5 pts easy just using the methodology they used up till early 1980’s
But all you have to do is work three jobs and then inflation is not real … Take those disinflated earnings from three jobs keeping ahead of inflation, thus no longer real, and put them in stonks and crypto. You can’t lose! At least that’s what the talking heads tell me. So much winning …
link to wsj.com
Old enough to remember Greg Ip as a Fed Whisperer …
One thing that is not accounted for is tax burden increases. Taxes take a whack out of affordability and spending and it goes into a black hole of inefficiency. And taxes are going up everywhere. Cities are increasing bond burden(taxes pay for the interest) and just flat out increases.
Taxes will increase even further when the TCJA tax provisions roll over next year, especially for sole proprietors, who will lose the 20% QBI deduction.
An absolutely hideous report. We should be talking about rate rises, not cuts.
No doubt the “bulls” will find a way to distort these realistic numbers. Don’t discount anything the fed might do to enhance the biden’s chances to win. After all, powell knows if trump wins, he is out of a job in November.
As someone who owns homes and hardly uses ten gallons of gas a month, WHAT ME WORRY? Market is gonna ramp soon enough, it’s clear the economy is performing well and our natural interest rate is higher temporarily at 3-5% compared to the days of ZIRP. Get used to it. I don’t see a single cut this year, unless they’re trying to help keep Biden in office.
They need to do what’s right. It’s terrible to think they will be political when so much is on the line.
Check out the trend in the Atlanta Fed’s probability page. The skew in the options markets has been drifting away from 3 cuts to now 1-2 cuts being the mode. I think after today, the mode will be at one cut, and since markets generally have a degree of autocorrelation I think it’s reasonable to think the SOFR markets will continue to drive toward 1 cut by December. That’s the market. I’m personally more in the zero cut camp and concerned another hike could be necessary.
Anyone that has savings for long term wants rate increases. At 5% you can earn $5,000 annual interest for every $100,000. That money helps supplement social security income to pay for all the continued inflation.
Got Gold?
The problem is you aren’t factoring in inflation or taxes.
If you have 100K money and earn 0% interest then in 10 years you still have 100K. If inflation is 0% over that time your 100K still buys 100K of goods so you are fine.
If you have 100K money and earn 5% interest then in 10 years you have 162889 dollars. If inflation is 5% over that time then your 162889 buys 162889 dollars so you are fine.
But there is this thing called taxes. That 62889 dollars gets taxed and if it gets taxed at even 1% then you need to earn 6% to deal with 5% inflation to still have the same amount of money after 10 years.
So yeah savers love the idea of getting 5% but unless your 5% is greater than inflation + taxes you are worse off than if there was 0 interest and 0 inflation.
I agree. I was just pointing out this is guaranteed income to SUPPLEMENT social security to help with inflation.