Another nail in the "imminent rate hike" coffin thesis came moments ago when the BLS reported that May CPI missed both on the headline (0.4%, exp.0.5%) and on the core (0.1%, exp. 0.2%) despite a 10.4% surge in the price of gasoline. Other energy indexes were mixed, with the fuel oil index rising but the electricity index declining and the index for natural gas unchanged. The food index was unchanged for the second month in a row, as a decline in the food at home index offset an increase in the index for food away from home.
Core CPI:
At least this time, the BLS was not so naive as to try to pass the latest record rent prints as a drop in housing costs saying that "the index for all items less food and energy rose 0.1 percent in May, its smallest increase since December. The indexes for shelter, airline fares, and medical care all increased, as did the indexes for personal care, recreation, new vehicles, alcoholic beverages, and tobacco." But if you rent has you down, fear not: at least you can dress in style and buy furniture for that apartment you can't afford: "the indexes for apparel, for household furnishings and operations, and for used cars and trucks all declined in May."
The full breakdown of May's CPI:
But all eyes on gasoline which, since plunging gas prices were "unambiguously good" for consumers, then a 30% increase in the last 4 months must be unambigously bad, right Larry Kudlow?
Perhaps what is most surprising is that like Europe, so the heat map of US inflation is also quite regional, with only California seeing a jump in inflation mostly on soaring gas prices in the state. Everywhere else: deflation.
- NorthEast -0.3%
- MidWest -0.8%
- South -0.4%
- West +1.2%
And while the BLS' inflation measures of food and housing are so stretched and manipulated as to be utterly meaningless, here is where in the CPI report the prices of the all important core items moved:
The index for all items less food and energy increased 0.1 percent in May following a 0.3 percent increase in April. The shelter index, which rose 0.3 percent in April, increased 0.2 percent in May. The indexes for rent and owners' equivalent rent both rose 0.3 percent, but the index for lodging away from home turned down in May, falling 2.0 percent. The index for airline fares, which had declined 5 of the last 6 months, rose sharply in May, increasing 5.7 percent. The medical care index rose 0.2 percent in May after increasing 0.7 percent in April. The hospital services index rose 0.5 percent and the index for prescription drugs advanced 0.4 percent. The personal care index rose 0.3 percent in May, while the recreation index increased 0.1 percent. Also increasing in May were the indexes for new vehicles (0.2 percent), tobacco (0.4 percent), and alcoholic beverages (0.2 percent). In contrast to these increases, the apparel index declined 0.5 percent in May. The index for household furnishings and operations fell 0.3 percent, and the index for used cars and trucks decreased 0.4 percent.
The index for all items less food and energy has risen 1.7 percent over the past 12 months, a slight decline from the 1.8-percent increase for the 12 months ending April. The shelter index has risen 2.9 percent over the last year, the medical care index has increased 2.8 percent, and the new vehicles index has advanced 0.8 percent. The indexes for airline fares, apparel, and used cars and trucks have all declined over the past 12 months.
In conclusion: another month in which the Fed's trillions in reserves end up almost entirely in the stock market and NYC penthouses, with little trickling down into clothes and other "core" items, even as beef prices [11]and asking rent [12]hit record highs month after month.




