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CPI Unexpectedly Weak, Allegedly No Inflation In October

By Mike (Mish) ShedlockMarket OverviewNov 13, 2020 02:29AM ET
www.investing.com/analysis/cpi-unexpectedly-weak-allegedly-no-inflation-in-october-200544513
CPI Unexpectedly Weak, Allegedly No Inflation In October
By Mike (Mish) Shedlock   |  Nov 13, 2020 02:29AM ET
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The BLS reports 0.0% inflation in October vs 0.2% expectation. Year-Over-Year inflation is allegedly up 1.2%

CPI Index Components YoY
CPI Index Components YoY

CPI Month-Over-Month as the BLS Sees Things

CPI Month-Over-Month As The BLS Sees Things
CPI Month-Over-Month As The BLS Sees Things

Month Over Month Key Points

  • The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in October on a seasonally adjusted basis after rising 0.2 percent in September.
  • The food index rose 0.2 percent, with the food away from home index increasing by 0.3 percent and a smaller 0.1-percent rise in the food at home index.
  • The energy index rose 0.1 percent in October as the index for electricity increased 1.2 percent.
  • The index for all items less food and energy was unchanged in October following an increase of 0.2 percent in September.
  • The index for shelter increased 0.1 percent in October
  • The index for medical care declined by 0.4 percent.
  • The indexes for airline fares, recreation, and new vehicles rose.
  • The indexes for motor vehicle insurance, apparel, and household furnishings and operations declined.

The BLS CPI Report says that nets to zero.

CPI Year-Over-Year as the BLS Sees Things

CPI YoY As Reported
CPI YoY As Reported

Year-Over-Year Key Points

  • The all items index rose 1.2 percent for the 12 months ending October, a slightly smaller increase than the 1.4-percent rise for the 12-month period ending September.
  • The index for all items less food and energy rose 1.6 percent over the last 12 months after rising 1.7 percent in September.
  • The food index increased 3.9 percent over the last 12 months
  • The energy index declined 9.2 percent.

Consumer Price Index Components 1990-Present

Consumer Price Index Components 1990-Present
Consumer Price Index Components 1990-Present

What About Housing?

The BLS does not directly include home prices in the CPI. The latest Case-Shiller home price index is up 5.7%.

Instead of using home prices, the BLS uses Owners' Equivalent Rent (OER). OER is determined by asking homeowners how much they would expect to pay in rent if they rented their own house from themselves.

Ask anyone looking to buy a home what inflation looks like.

Failure to properly account for housing has distorted the CPI continually from 1998 until now.

The Fed did not spot the housing bubble nor predict the Great Recession because it did not understand the asset bubble.

CPI Percentage Weights

CPI Percentage Weights
CPI Percentage Weights

What About Health Care?

CPI Medical Care Service Index YoY
CPI Medical Care Service Index YoY

The BLS says the cost of medical care is up 20% from a year ago.

As anyone buying their own health care how accurate that is. Also ask anyone buying their own health care if it is only 6.97% of their budget.

What About Bubbles?

The stock market and risk tolerance is also a measure of inflation. It is nowhere to be found in the indexes.

Add it all up and the CPI is a gross distortion of reality on many fronts.

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CPI Unexpectedly Weak, Allegedly No Inflation In October
 

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CPI Unexpectedly Weak, Allegedly No Inflation In October

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