February CPI: an excellent report, with even the persistent “problem children” getting “less bad”
– by New Deal democrat
Let me reduce proper to the chase: the February client inflation report was truly excellent. It wasn’t simply that the headline and core numbers solely went up 0.2% for the month, or that the YoY features in every decelerated. Let me allow you to in on a bit of secret: one of many first issues I do when the report comes out is scour the classes for any “problem children,” which I arbitrarily outline as a class the place there was greater than 4% inflation YoY.
This month, outdoors of the 2 most lagging suspects, shelter and transportation providers, there have been none outdoors of some actually obscure small elements, like males’s fits. And even within the case of the 2 remaining drawback youngsters, each decelerated, particularly on a YoY foundation.
So, let’s get to the graphs.
First, listed below are the headline (blue), core (purple), and ex-shelter (gold) YoY% numbers:
On a YoY foundation, headline costs have been up 2.8%, core was up 3.1%, and ex-shelter costs have been up 2.0%. The YoY headline quantity was the bottom in 4 years outdoors of the comfortable patch late final 12 months. The core quantity was the bottom in virtually 4 years interval.
Apparently, CPI much less shelter jumped 0.5% in February. This would possibly give me trigger for concern, however after I regarded again on the month-to-month information for the previous 10 years, the February readings on this metric have usually been among the many highest of the 12 months, suggesting unresolved seasonality points. Right here’s the related graph (I do know, squiggles, however belief me lots of the massive jumps have been in February):
Now let’s flip to the chronically massive drawback little one: shelter. This elevated 0.3% for the month, tied for the 2nd lowest month-to-month improve prior to now 2.5 years. And on a YoY foundation, at +4.2%, it was the bottom in over 3 years. The under graph breaks it down into its Homeowners Equal Lease (purple) and hire of major residence (blue) elements on a month-to-month foundation:
You possibly can see that the downtrend stays intact. And the identical is true after we take a look at it YoY:
At 4.4% for OER and 4.1% for precise hire, each are at 3 12 months lows. Though I received’t hassle with the graph at this time, since this collection lags precise home costs, I proceed to count on sluggish disinflation winding up someplace across the 3.5% vary throughout the subsequent 12 months. That is buttressed by the latest updates for brand spanking new hire costs, which proceed to be flat YoY.
The information can also be “less bad” for the opposite, much more lagging drawback little one, transportation providers. That is primarily motorized vehicle insurance coverage and repairs, which go up in worth after the value of automobiles and automobile elements go up. For the month, it was unchanged, and on a YoY foundation, it was up “only” 6.0%, nonetheless the very best studying in 3 years:
Cleansing up a couple of different factors, the previous drawback little one of car costs continues its normalization course of. New automotive costs have been unchanged for the month and truly *down* -0.3% YoY, whereas used automotive costs elevated a pointy 0.9% for the month, however are solely up 0.8% YoY:
Word the above graph norms each to 100 simply earlier than the pandemic. Since that point new automotive costs are up 20%, and used automotive costs up 33%. This can be a lingering after impact of the scarcity of latest automobiles within the first a number of years after the pandemic because of the lack of ability to supply laptop chips in adequate quantity. Though I received’t hassle with the graph at this time, remember that common hourly wages are up 28.5% for the reason that outset of the pandemic as nicely, so solely used automobiles are increased in “real” phrases since then.
And what about gasoline costs? CPI for power elevated 0.2% for the month, and is *down* -0.3% YoY:
No upward stress there in any respect for the second.
To sum up, as I mentioned firstly of this observe: this was an excellent report. There have been solely two, lagging, continued drawback youngsters, and their contributions have been lessening. As has been the case for the previous 2 years, take out shelter and client inflation has not been an issue in any respect.
Lastly, let’s see what that does for “real” wages and payrolls.
“Real” wages for nonsupervisory employees rose 0.1% in February and have been 1.3% increased YoY. The dangerous information is that they’ve been stagnant since October:
“Real” combination payrolls for nonsupervisory employees rose 0.2% in February (blue, proper scale), however they continue to be barely under their all time excessive set in December. Nonetheless, they continue to be increased YoY by 2.3% (purple, left scale), in step with their growing pattern over the previous 24 months:
Excluding the pandemic, and the 1970 recession, they’ve at all times peaked numerous months earlier than the onset of recession. I’ll solely be involved if this collection fails to exceed its December peak for a number of extra months.
“January’s CPI increase of 0.5% in consumer prices was not welcome and . . ., ” Offended Bear, by New Deal democrat
