SuperCore CPI Jumps Back Above 4.00%; Used-Cars & Shelter Dominate Price-Rises

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by Tyler Durden
Tuesday, Dec 12, 2023 - 03:55 PM

Having slowed to unch MoM in October, November's headline CPI was also expected to be flat MoM, but it printed modestly hotter than expected +0.1% MoM, which dragged the YoY CPI change down to 3.1% (as expected) from 3.2% in October. That is still above June's 3.1% YoY low print...

Source: Bloomberg

Core CPI accelerated modestly MoM (as expected), rising 0.3% (from +0.2%) with Core CPI YoY flat at 4.0% from October...

Source: Bloomberg

Most problematically for The Fed (and the 'rate-cut-hypers') is the fact that Core CPI Services Ex-Shelter (SuperCore) rose 0.5% MoM (hot) and 4.08% YoY (back above the Maginot Line of 4%)...

Source: Bloomberg

Transportation Services led the unexpected resurgence...

Under the hood, Energy declined considerably but Used Car prices rose...

The shelter index was the largest factor in the monthly increase in the index for all items less food and energy. 

The shelter index increased 0.4 percent in November, after rising 0.3 percent the previous month. 

The index for rent rose 0.5 percent in November, as did the index for owners’ equivalent rent. 

The lodging away from home index decreased 0.9 percent in November. 

The slowdown in Shelter/Rent inflation is starting to accelerate...

  • Shelter inflation: 6.51%, down from 6.72% and lowest since August 2022

  • Rent inflation: 6.87% down from 7.18%, first sub 7% print since August 2022

But, real-time rent inflation is already far, far lower (suggesting CPI is set to tumble further next year)...

The used cars and trucks index rose 1.6 percent in November, ending a string of five consecutive monthly decreases in that index. 

Among the other indexes that rose in November was the index for motor vehicle insurance, which increased 1.0 percent after rising 1.9 percent the preceding month. 

The medical care index rose 0.6 percent in November, after rising 0.3 percent in October. The index for physicians’ services increased 0.6 percent over the month, and the index for prescription drugs rose 0.5 percent. The hospital services index rose 0.1 percent in November.

The index for apparel fell 1.3 percent in November, after rising 0.1 percent the previous month. 

The index for household furnishings and operations declined 0.4 percent over the month, and the index for communication decreased 0.6 percent in November. 

Other indexes which declined in November include recreation, airline fares, and new vehicles.

The shelter index increased 6.5 percent over the last year, accounting for nearly 70 percent of the total increase in the all items less food and energy index.

Other indexes with notable increases over the last year include motor vehicle insurance (+19.2 percent), recreation (+2.5 percent), personal care (+5.2 percent), and new vehicles (+1.3 percent).

3m and 6m annualized rates are down one-tenth and three-tenths respectively to 3.3% and 2.8%. This is the first time that the 6m measure has been below 3% for since March 2021.

The actual index of consumer prices hit a new record high this month - and is up 17.5% since President Biden's term began (it was up 8% over President Trump's full four year term)...

Source: Bloomberg

On the bright side, real average hourly earnings rose 0.5% YoY in November...

Source: Bloomberg

Finally, we bring your attention to a chart we posted one year ago, showing the correlation between M2 and CPI, when we predicted that CPI was about to collapse.

One year later we were right, and there is much, much more to go.

So, what happens next?

Goldilocks? Or does this mean Powell will have to push back harder against the exuberance in the market for rate-cuts?