CPI-U +0.2%, Core +0.1%: Medical Care and Shelter Components Highly Questionable

The CPI came in under expectations across the board. I question shelter and medical components.

The Econoday consensus estimates fore CPI were 0.3% for CPI-U, 0.2% for the core CPI, and +2.8% year-over-year.

Econoday Comments

  • Contraction in medical costs and apparel and only a marginal increase in food all held down consumer prices in August. Consumer prices rose only 0.2 percent with the ex-food ex-energy core up only 0.1 percent -- both results 1 tenth lower than Econoday's consensus.
  • A second month of decline for medical care, which makes up nearly 1/10 of the overall index, is a striking feature of the data. Year-on-year medical costs are up only 1.5 percent. A third straight drop in apparel prices, down 1.6 percent in the month and 1.4 percent on the year, and a 0.1 percent decline in recreation are also areas of price weakness. Food rose only 0.1 percent in the month with this yearly rate up only 1.4 percent.
  • Housing makes up more than 40 percent of the index and here the results do show some traction, up 0.3 percent in the month for a 2.9 percent rise from this time last year. Energy, which makes less than 1/10 of the index, is also pulling prices higher, up 1.9 percent in the month for a 10.2 percent yearly gain.

BLS Highlights

Let's tune into the BLS Consumer Price Index Report for August 2018 for actual results.

  • The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in August on a seasonally adjusted basis, the same increase as in July.
  • Over the last 12 months, the all items index rose 2.7 percent before seasonal adjustment.
  • The index for all items less food and energy rose 0.1 percent in August, the smallest monthly increase since April. Along with the shelter index, the indexes for airline fares and used cars and trucks were among those that increased in August.

CPI-U Month-Over-Month

Details

  • The energy index increased 1.9 percent in August; a 3.0-percent increase in the gasoline index was the largest factor, but the other energy component indexes also rose.
  • The shelter index increased 0.3 percent in August, the same increase as in July.
  • The food index rose only slightly in August, with the index for food at home unchanged.
  • An array of indexes declined, including apparel, medical care, communication, recreation, and personal care.

CPI Year-Over-Year

Year-Over-Year Details

  • The all items index rose 2.7% for the 12 months ending August.
  • The index for all items less food and energy rose 2.2% for the 12 months ending August.
  • The energy index increased 10.2%
  • The food index increased 1.4%
  • The shelter index rose 3.4%

Medical Care

  • Month-over-month medical care services: -0.2%
  • Year-over-year medical care services: +1.9%
  • Month-over-month medical care commodities: -0.3%
  • Year-over-year medical care commodities: +0.3%

Anyone buying their private health care insurance will likely think those numbers are a joke. Many have reported private policies rose 20% to 100%.

Shelter

The shelter index is also a joke. It does not include new or resale home prices.

As of June, the year-over-year 20-city Case-Shiller index rose 6.37%. The BLS shelter index, which does not include new home sales or resales, rose 3.4%.

The Fed is way behind the curve, just as it was in 2006. The reason is the same. The Fed ignores asset prices, even homes, in its inflation measures.

Mike "Mish" Shedlock

Comments
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Hardwork23
Hardwork23

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thimk
thimk

Well did the bond market react ?

Blacklisted
Blacklisted

For far too long the Fed ignored savers, pensions, and Social Security, at the behest of the IMF and foreign leaders. They can't be ignored any longer, which is why they are raising rates, and will continue in a joking attempt to prevent being labeled a serial bubble blower. Of course, this will only attract more capital into dollar-based assets.

The Fed is not raising so they have room to cut when things turn south. They know rate cuts are fruitless when there is no demand, except for buybacks. The next stick save for the banks will come via bail-ins.

hmk
hmk

Don't forget the financing costs for the national debt. It seems all the media outlets drink the cool aid and don't question the wizards of OZ's propaganda.

KidHorn
KidHorn

Who pays attention to these numbers? The BLS has an incentive to report low inflation to keep all COLA's tied to it as low as possible. Report the lowest number they can that they can defend.

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