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Rents Are Soaring BLS Admits, As Core CPI Comes In Hottest In Over A Year
While the September Consumer Price Inflation report was in line with expectations, with the headline CPI declining -0.2% in the month - the biggest monthly drop since January - and unchanged from a year ago, just as consensus predicted, it was all about the core CPI where attention was focused.
On the headline print, the drop was once again due to tumbling energy prices, which declined 4.7% in September, and especially gasoline which tumbled -9.0% according to the BLS: "The gasoline index continued to fall sharply and was again the main cause of the seasonally adjusted all items decrease. The indexes for fuel oil, electricity, and natural gas declined as well."
Other contributors included Energy Services, which dipped -0.4% led by a -0.5% drop in Electricity costs and a -0.3% decline in Utility gas service.
All of this was expected.
Where the market was surprised, however, was in the Core CPI print (excluding food and energy), which rose 0.2% for the month, above the 0.1% expected, and is now up 1.9% Y/Y, the highest rate of annual increase in over a year.
What prompted the increase? Pretty much all of the most important essentials: "The indexes for shelter, medical care, household furnishings and operations, and personal care all increased." Some core items did decline, such as apparel, used cars and trucks, new vehicles, and airline fares however one particular item caught everyone's attention - shelter.
From the release:
The index for all items less food and energy increased 0.2 percent in September after rising 0.1 percent in July and August. The shelter index increased 0.3 percent in September after rising 0.2 percent the prior month. The rent index increased 0.4 percent and the index for owners' equivalent rent increased 0.3 percent. The index for lodging away from home increased 0.8 percent in September after declining in August. The medical care index rose 0.2 percent in September with the indexes for physicians' services and hospital services rising but the index for prescription drugs declining slightly. The index for household furnishings and operations increased 0.3 percent after declining in each of the four previous months. The index for personal care rose 0.3 percent, and the alcoholic beverages index rose 0.1 percent. In contrast, the apparel index fell 0.3 percent after rising in July and August. The index for used cars and trucks fell 0.2 percent, while the new vehicles index declined 0.1 percent, as did the tobacco index. The index for airline fares also declined 0.1 percent in September after declining more sharply in July and August. The recreation index was unchanged in September.
The index for all items less food and energy has risen 1.9 percent over the past 12 months; this is a slight increase from the 1.8 percent rise for the 12 months ending August and is the highest 12-month change since July 2014. The shelter index has increased 3.2 percent over the past 12 months with the rent index up 3.7 percent; these figures have been gradually trending upward
And here is the moment when the BLS finally admits there is a surging rent problem: up 3.7% Y/Y, average rents are rising not only double the pace of core inflation, but at the highest pace since late 2007, when the US consumer was in a far stronger condition to withstand such price increases.
Of course, we already knew this:
As to why this is a concern:
Which is why the market reacted the way it did, and pushed the USD promptly higher in a kneejerk reaction - because while the Fed is boxed in all other fronts, if Yellen is indeed worried about that most important concern to all Americans, namely affording the roof over their heads, then now is clearly the time to hike rates and prick the rental bubble before it gets so big, the primetime news are flooded with coverage of Americans sleeping under bridges because they can no longer afford rent (forget mortgage).
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nice...Blackstone and other rescued financial firms putting the squeeze on people who can't afford homes and weren't rescued...and haven't seen their income increase. Thank you corrupt FED
China is "stockpiling" US Housing...it will end like all other Chinese "Stockpiling" events (copper, rare earth, iron ore, coal, ect.)...massive losses on all fronts for the bag holders.
;-D
No worries --- COLA will still be zero.
Lots of used RVs out there for cheap. If you ever get in trouble, there is your rent free and tax free shelter. Fill it up with your extra food, a water filter and a lead positioning device and you've got the perfect bug out setup.
With everything so far this morning cited as bad news and a worsening economy I can only foresee the DOW shooting up 250 to take us into this weekend.
Negative is the new positive.
Could be big.
Yep. Dow futures already up 56. We are in good shape. Just need Gartman to change his stance from bullish (its been over a week with no flip-flop) and its a lock.
Opex tomorrow so anything could happen.
DavidC
How exactly do wages rise when the largest expense, is running this hot? How was shelter negative in the last PCE GDP report? some serious fuckery going on.
On average, when looking at everything you need for a decent standard of living (education, rent in a good neighborhood, energy, food, healthcare) I see the real inflation running at about 8-15% per year since 2001, depending on where you live. In some places education and healthcare have been running much hotter.
Sure, some places are still inexpensive, but the wages there are typically very low, if people are "officially" employed at all...
I agree that the real inflation rate is higher than officially reported. Fortunately, the government has decided that Social Security recipients don't need more money next year since the price of gas is so low. If SS payments went up I might be tempted to buy something I don't need - think round pieces of certain metals, cylindrical pieces of other metals - with all the extra dough. What is needed is to tie the growth of government spending to the same figure used to determine SS increases.
And so it begins....
first deflation then...
the Fed knows that they are way, way, behind the curve again. Expect massive pushes for even more progressive policies...
after all, it is what made the great depression "great"...
Re: Core CPI is now up 1.9% Y/Y
The Chapwood Inflation Index for trailing 12 months of June 30, 2015
NY 10.9%
LA 11.2%
Chicago 10.1%
Yes, we have no inflation in the land of lies
The Chapwood Index reflects the true cost-of-living increase in America. Updated and released twice a year, it reports the unadjusted actual cost and price fluctuation of the top 500 items on which Americans spend their after-tax dollars in the 50 largest cities in the nation.
http://www.chapwoodindex.com/
CPI is up over 13% since the 08 debacle
That is what Yellen and the others think is no inflation.
These charts that only display the YOY increases OMIT the COMPOUNDING effect
The Fed is mandated to STABLE prices.....not 2% inflation. QUESTION THE FED.
Also ignores WAGES and the underlying purchasing power of those wages.
Want to see a progressive's head explode, ask them if they consider SNAP recipients to be just like any other "customer"...
FUCK YOU BERNANKE!!!!!!!
Somewhere along the line 'stable' got mutated into 'a stable positive figure', i.e. 2%.
Somebody in the Fed has applied a lawyer's play on words to redefine 'stable'.
DavidC
Food, Shelter and Water. Toss in Energy and there you have it, all the things that ought not be in the CPI accounting basket! (pretty sure that if air cost that it too would be missing)
The state of things can only be one of the things: Expanding; Contracting; or, Stasis. Since stasis is really a footnote dividing expansion and contraction, we are pretty much either expanding or contracting. Not seeing how one could define the state of things as being expansionary, which leaves us with...
When measuring individual things it's more appropriate to do so through the lens of "affordability."
If the 0.1% can't get enough interest income from their debt paper they have to get it through increasing the rent. Give them a break.
If you avoid the rent increase by being homeless they still get you with food away from home.
Definitely, we should ignore food and energy. I mean, who uses those?
Anyone else catch that they're not raising Social Security payments for 2016 because inflation is too low? HA!
That's right.
Grandma isn't starving yet. She can still subsitute the branded cat food for the generic. Unfortunately kitty will be left with what ever it can scrounge outside.
Thanks goodness all those able bodied niggers still have their free food, housing, phone and now health care. Woudn't want any of those precious darlings to ever have to work. I mean, just remember that lovely little Trayvon kid who Obama fell in love with.
Elderly & fixed income folks get screwed again inflation is all around us
I don't know about you, but the prices I pay at the grocery store have been rising at a steep rate. At the same time, the portion sizes have also been dwindling (try finding a ½ gallon of ice cream, a 16-oz box of cereal etc.). Food one of life's necessities is taking a bigger and bigger slice out of the average mom & pop’s budget. Of course, our dipshits within our government haven’t seemed to notice at all....The BLS, released September's inflation numbers last Thursday. The consumer price index (CPI) fell 0.2% during the month after a 0.1% drop in August; not surprising, given the fact that gasoline prices fell 9% last month alone (can’t drink gas). My experience at the local supermarket begs to differ with the BLS on so many fronts. In September 2010, the average price for a pound of ground beef was $2.20. According to the data just released by the BLS, that same pound of hamburger now costs $4.13. That's a whopping ~85% increase, fresh vegetables like tomatoes rose 16% y/y, eggs have increased 70% more y/y, break is up 14% y/y, canned soups are on average up 10.25% y/y
Those on a fixed income, like retirees, cannot count on raises. And they won't be getting any help from Social Security this year either. That's because, on Thursday, the government announced that there would be no cost of living adjustment (COLA) for Social Security benefits. Most retirees have seen their living costs go up. Clearly, there is a huge disconnect (my opinion the government led by the republicans are out to enslave the poor even more). Most retirees do not work; they drive on average 50-60% of what they used to and the older they get, the more money they spend on healthcare (which rose 9.1% this year. As a result, retirees have not benefited much at all from falling gas prices. Rising food costs, healthcare and premiums have had a disproportionate NEGATIVE impact on expenses of retires and those dependent on COLA increases most will see their standard of living decline and far too many will see a significant decline.