Rate Cuts? CPI Says 'Nope!'
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2024-03-13 08:44 by Karl Denninger
in Consumer , 316 references Ignore this thread
Rate Cuts? CPI Says 'Nope!'
[Comments enabled]

And here's the latest...

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in February on a seasonally adjusted basis, after rising 0.3 percent in January, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.2 percent before seasonal adjustment.

The index for shelter rose in February, as did the index for gasoline. Combined, these two indexes contributed over sixty percent of the monthly increase in the index for all items. The energy index rose 2.3 percent over the month, as all of its component indexes increased. The food index was unchanged in February, as was the food at home index. The food away from home index rose 0.1 percent over the month.

The index for all items less food and energy rose 0.4 percent in February, as it did in January. Indexes which increased in February include shelter, airline fares, motor vehicle insurance, apparel, and recreation. The index for personal care and the index for household furnishings and operations were among those that decreased over the month.

If you recall last month I noted that a serious ramp in gasoline prices started just after the survey week so it was definitely going to show up in the numbers this month.  It did.

But more importantly all items less food and energy, otherwise called "core" inflation, has begun increasing once again after coming down into the 0.2 - 0.3 monthly range for the back half of last year.  It now stands at 0.4% for the last two months which annualizes to 4.9%, or if you want a nice round number, 5%.  That is 2-1/2 times the Fed's alleged target.

The claim is that gasoline was up "just" 4.3% unadjusted.  That's garbage; most areas of the country I watch (including where I live, and I was traveling during the survey period too) saw double that rate of increase on the month, but heh, there's no reason to be honest, right?

The other interesting one, which does appear roughly correct, is piped gas.  It had a small spike last month but is now, as expected with the end of winter heating demand, coming down.

In the "big household" category of course rent remains extremely high in terms of the Fed's "target" as does auto insurance, which continues a 20% annualized increase rate.  Of course nobody cares about this when it comes to the basics of insurance companies and how they make money (and thus how we'll never take care of this problem in all insurance industries until we make any sort of collusive and "push" programs through government something that we actually punish under 15 USC) -- that is, since insurance companies are regulated as to their profit margin the only ways to grow are to either have more claims or more expensive claims.  This isn't a conspiracy -- it is just a basic economic fact of how insurance companies are regulated and thus what public policy has to do lest the cost of the underlying items insured against be forcibly ramped by collusion between said firms, the makers of same and government, particularly when said insurance companies are public entities.  The required laws to so-regulate conduct exist but, in the last 20+ years, it has become public policy to not enforce them at either the state or federal level no matter who or which party is in office.

The internals of the report do show one quite-concerning area -- beef products were up a lot over the month, 7.4%.  Beef is, of course, a primary and excellent source of human nutrition.  It isn't all meats, however, as pork products were down in price.  I guess I'll have to stick some baby backs in the smoker instead of a nice brisket.

A few other curiosities -- FCOJ (frozen concentrated orange juice), the subject of Trading Places, was up 27.2% on the month and fast food continued its ramp, up an astounding 5.2% on the month.  Another of serious impact was non-prescription drugs which were up 9.3% on the month (I don't know what drove that as I don't buy them in general) and medical equipment and supplies which were up 3.4%.  Hope you don't need any of those.....

In any event I see nothing in this report supporting lower interest rates anywhere in the horizon.

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