Looking ahead, year-over-year comparisons are very difficult. That’s on top of tariffs.
The all items index rose 2.3 percent for the 12 months ending April, after rising 2.4 percent over the 12 months ending March.
The April change was the smallest 12-month increase in the all items index since February 2021.
Major Resistance
- April does not have a tariff impact. That won’t be true going forward.
- The monthly comparisons (numbers to beat for improvement) are about to get very difficult.
CPI Month-Over-Month SA Comparison
On a seasonally-adjusted basis the next four comparisons are 0.04, 0.00, 0.14, and 0.18.
If the BLS reports higher numbers, the year-over-year numbers will rise.
Since year-over-year comparisons are usually made unadjusted, here’s the unadjusted chart.
CPI Month-Over-Month Not Adjusted Comparison
For the next 8 month the easiest number to beat is 0.17. Anything over that string of numbers will cause the year-over-year CPI to rise.
I would focus on the month-over-month SA chart because the seasonal adjustments are screwy.
If the BLS reports 0.2 percent and 0.3 percent for May and June, seasonally-adjusted, the year-over-year CPI will be approximately 2.8 percent in June.
Shelter Factor
Shelter is 35.426 of the CPI, with OER at 26.176 percent and Rent at 7.463 percent.
Rounded to two decimal places rent is 0.34 percent and OER 3.6 percent.
If these components have bottomed as I have shown, the CPI might be very ugly for a few months.
If that last arrow up is incorrect, then shelter could alleviate some impact from tariffs.
The Base Case
Tariffs plus difficult comparisons have put a floor on falling CPI year-over-year.
Shelter may compound or help alleviate those impacts.
CPI Better than Expected Thanks to a Drop in the Price of Food
Earlier today I noted CPI Better than Expected Thanks to a Drop in the Price of Food
The CPI rose 0.2 percent vs. the consensus estimate of 0.3 percent. The good news stops there.
The bond market reaction to this report was negative. Yields rose at the long end of the curve.
The 10-year note is us to 3 basis points to 4.48 percent and the 30-year long bond is up 5 basis points to 4.93 percent, both higher despite the CPI being better than expected.
That’s arguably the best measure of the report.
But also weighing on the bond market is a massive increase in the budget deficit and debt if Trump gets the “One Big Beautiful Bill” that he wants.
Spending is up a whopping 58 percent in six years and Congress doesn’t want to challenge Trump on it.
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Ominous Looking 10-Year and 30-Year US Treasury Yield Charts
On May 3, I commented on the Ominous Looking 10-Year and 30-Year US Treasury Yield Charts
Neither the technical pattern nor the fundamentals have changed.
Trumps “big beautiful bill” is now becoming a bloated shoo-in along party lines and our deficit will rise precipitously again as trump has not controlled spending, increased economic activity or taxed responsibly.
The giveaways have only been increased and the right wing swamp has flooded more of the land with ever deepening debt.
Like all politicians, trump is just another liar. A very accomplished liar
First time he was elected Trump promised to eliminate the entire debt in eight years. That’s straight up stupidity. Anyone who believed Trump’s word after nonsense like that deserves all the suffering their vote for Trump brings their way.
Left wing swamp, right wing swamp it doesn’t matter. Congress noted the amount of howling from Musk’s tiny cuts and the minuscule decrease in graft from USAID, there will be no cuts.
Zeroing the deficit would take a $10,000 per worker tax increase, or the complete elimination of all federal health care spending and some Defense cuts. It’s not happening.
re: “If these components have bottomed as I have shown, the CPI might be very ugly for a few months.”
That’s what money flows show, the 2-year roc in our means-of-payment money supply.
Sept. is the top.
Food and energy prices are what matters most for voters.
Rent matters also – but voters usually associate rent with the local economy (not a Federal issue).
The Twilight of US Shale | Eric Nuttall
https://www.youtube.com/watch?v=yIZ5f1cy8l4
Eric is one of my top 5 analysts that I follow. He is best at stock picking. I recommend that others follow his holdings in his energy funds. I get a lot of stock ideas from him.
Diamondback is one of my core holdings, though I also trade it frequently.
Where Eric struggles is the same place everyone does; predicting the future. He has been wrong for the last year, believing that Saudi and OPEC would restrict production to keep oil above $70. Nope. OPEC is ramping up production again and the result was oil prices dropping to $60.
Which is why shale production will drop. With tier one inventory shrinking, and breakeven costs of $65+, companies like Diamondback are reducing drilling till prices get back above $70. So US production will begin to drop from 13.5 mbpd to 12-13 mbpd if prices stay below $70. To keep production steady Diamondback says $70 minimum. To increase production again would require even higher prices; $75-$80.
At $70+, which Eric expected, he said Permian production would likely peak and then begin to decline in 2028. If prices stay below $70, then the decline will have already started.
Which helps Canadian oils, which often have breakevens of $30-$50.
Eric Nuttall is correct on the recovery rates falling when prices fall. My ex girlfriend inherited some nat gas mineral rights and the wells were drilled and then prices fell and they were shut in. Once turned back on, production never recovered remotely close to tested levels. Fortunately, there is another level of pay further down that has been discovered and at some point there will be additional drilling. If the U.S. sees peak production at this point due to the starvation of capital through trumps being bought by the Saudis it will bring irreparable harm to our domestic oil industry.
If she had inherited the mineral rights when you were still dating, you might be married.
inflation means that nominal prices will increase
Inflation means that the money supply will be increased.
So, since you know about this largely technical coming price level increase, and you’re a smart cookie, then we can assume that the PhD geniuses at the Fed do not know about it. They’ll spit out their fancy coffee drink when they see higher inflation numbers in coming months and run to Daddy Jerome’s office begging for rate hikes. Sound like turbulence coming.
Part is technical but tariffs and rent is structural.
Yes, the Fed can ignore the technical stuff but not the structural.
So it adds up to more waiting
My rent increased by 7% two weeks ago. The CPI reported is lower than the CPI as it actually exists. If the government starts lowering handouts on HUD Section 8, SNAP, mortgage forbearance, student loan forbearance, medicaid payments to illegal immigrants, social security payments to illegal immigrants, … the list goes on and on… , does that reduce CPI as reported, or increase CPI as reported?
Answer: The reported CPI would be HIGHER without all the government subsidies..
PS I forgot to mention ACA health insurance premium subsidies, which is a biggie.
CPI measures “out of pocket” costs for consumers, which means it hides price increases that are government subsidized. PCE, on the other hand, measures actual price increases, health care premiums being the ultimate example.
I read that student debt repayments should lower inflation by .5% for the year (.04% per month). I’m guessing it will be a few months before it has much of an impact.
Microsoft just announced 3% layoffs or about 6000 people. I know other companies laying off people as well.
There was a huge jump in social security enrollments in March, a whopping 412,000. I suspect people near retirement are getting laid off in droves and signing up for social security, it is more enticing now if it is tax free too. Has anyone factored in the extra enticement from tax free income?
https://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/2025-03.html
So my thesis continues, we are in a demographic death spiral, lots more people will become socialists and go on the dole to the tune of 80m by 2030.
We are short of aviation mechanics, air traffic controllers, nurses, doctors, etc. and it will only get worse. Effects visible now in real-time. Trump’s immigration round up won’t help the situation. Any reprieves in inflation are a good time to self-evaluate and adjust accordingly.
“It’s demographic turtles all the way down, and inflation all the way up!”
In lieu of tax-free social security, which can’t be enacted using budget reconciliation, the “big, beautiful bill” contains a temporary increase in the extra standard deduction for individuals 65 or older for 2025-2028.
Correct
Your hypothetical layoff/retirement wave has not shown up in the April Employment Situation Summary, nor in the last several weeks of unemployment claims.
Do you have reading comprehension problems? I said people were retiring so why would they show up on unemployment claims? In order to claim unemployment you have to be actively looking for a job.
There are different impacts on your severance when dealing with “retirement” vs quitting or getting fired.
https://www.cnbc.com/2025/05/13/microsoft-is-cutting-3percent-of-workers-across-the-software-company.html
They can get work at a tire retreader putting patches on.
Good point MPO. Trump and Musk tried to fire air traffic controllers on separate occasions, but the Transportation Secretary managed to talk them out of it. Now he says we need to hire 3000 more air traffic controllers because so many are coming up for retirement.
He is offering them 20% bonuses to continue working, rather than retiring.
You mentioned health care workers as well. With all the cuts, many professionals are considering leaving the US.
https://nationalpost.com/health/america-canada-brain-drain
He also raised the mandatory retirement age by 5 years.
If they choose, they can now continue working past age 56.
“Microsoft just announced 3% layoffs or about 6000 people.” Well Ok, so Microsoft kept their most productive 97%?
“We are short of aviation mechanics, air traffic controllers, nurses, doctors, etc. and it will only get worse.” Agreed! There is opportunity aplenty…
Become an Aviation Mechanic | Federal Aviation Administration
Air Traffic Controller Hiring | Federal Aviation Administration
Fruit Market Jobs, Employment in Everett, WA | Indeed
While motorcycling through Glacier last Summer I met two old guys in a bar in Eureka, WA. They were driving tourists through the park for the Summer. Both had gigs lined up for the Fall and Winter. One was going to drive scientists to sites in Antarctica.
“ Both had gigs lined up for the Fall and Winter. One was going to drive scientists to sites in Antarctica.” ????
Sounds more like he was pulling your leg.
You could be right! I was pretty sure they both had finished their summer stint driving red tourist busses through Glacier with the details they described. But they were both also candid with the fact that their better halves lived in the southeast US. They didn’t get to see them regularly. I didn’t pry as to whether that was good or bad over beers. My only point is there is opportunity. Health willing, I will look for these opportunities in retirement if I need/want to.
Through the tunnel?
😉
– Microsoft just announced 3% layoffs or about 6000 people. I know other companies laying off people as well.
> This happens in downturns, recessions and retirements along with other situations like “Open Borders” which disrupt the flow of skilled/trained workers. Nothing new here, maybe delayed because of ALL the free money that was given away too?
– There was a huge jump in social security enrollments in March, a whopping 412,000. I suspect people near retirement are getting laid off in droves and signing up for social security,
> I suspect it has Nothing to do with layoffs, as the skilled workers they wish to keep, and are shoving money at them to stay. There is a massive shortage of “Manual Labor” for sure, but again it has nothing to do with layoffs, but what people decided to do after H.S. & College. As the Government threw no questions asked loans at kids, bypassing needs (Skilled Trades Jobs) for our country, and more about making money for the Teachers Unions, and other glob/grift on parties that have shown up as a result. I think they called this “Bidenomics”?
– it is more enticing now if it is tax free too. Has anyone factored in the extra enticement from tax free income?
> First, it’s not a thing yet, and may never be, but more importantly, people don’t quit their jobs because S/S “MAY” become tax free. It is tax free, if you’re earning stay-in line. It’s much more about having “Retired People” That Don’t Need to Stay In The Workforce, while collecting S/S and not getting taxed on the additional income in retirement.
– Microsoft just announced 3% layoffs or about 6000 people. I know other companies laying off people as well.
> More will, as less are working and therefore spending money. Certain industries are getting crushed. “Tax Free Tips” is another method to keep workers in an industry that’s losing them fast.
the bonds, boss, the bonds!
How do the hedonics work out for higher prices / more value on the talking refrigerators?
Maybe if you are lonely or depressed, then a talking fridge might be of value – ha haaaa.
I would expect, the real challenge for them would be EVs, which are computers on wheels, but I am sure they handled it the usual way. Added high end car, ipad, Garmin, plus video games, and voila, you have a new base price with zero inflation.
The water filter is better because of drinkable water for the consumer and recurring annual revenue for fridge manufacturers.