Shelter Inflation. The Tail That Wags The Dog
Updated
Inflation is finally cooling off as inflation gradually loosened its grip on Wall Street and the economy in 2023, raising hopes for a gentler Federal Reserve and further gains for the market in 2024.
Stocks rallied to their best 9-weeks stripe over the past 20 years in November and December, 2023 (so-called 'Santa Rally') as investors raised their bets that the Fed is done hiking interest rates to fight inflation.
6Mo USCPI Inflation was at its lowest levels since Covid-19 pandemic in early 2023
Top 4 U.S. stock market Indices were in rally in 2023
The economy has cooled under the weight of rising interest rates, as the central bank intended, but remains surprisingly resilient.
Energy prices are down. Food prices are mellowing out. But the cost of having a place to live is still rising much faster than just about every other essential.
U.S. Consumer Price Index inflation
Headline inflation was up 3.1% from a year ago, and so-called "core" inflation, which excludes volatile food and energy prices, was up 4%. But the cost of shelter, which is the biggest component of the basket of goods the BLS uses to measure the cost of living, was up 6.5%.
"The shelter index was the largest factor in the monthly increase in the index for all items less food and energy," read the Bureau of Labor Statistics report accompanying the latest data on consumer prices.
"The shelter index increased 6.5 percent over the last year, accounting for nearly 70 percent of the total increase."
When the covid-19 pandemic hit, the cost of housing surged as those who could afford it sought out bigger homes and many city-dwellers transitioned to the suburbs.
What goes into Consumer Price Index
That and a glut of savings unhindered by low interest rates combined to exacerbate what had been a long-simmering Housing crisis the U.S.
But now that baked-in price hikes and rising mortgage rates spurred by tightened Federal Reserve monetary policy have put a bit of a damper on things, the housing market is also starting to cool.
U.S. Single Family Home Prices in "Bubble Mode"
30Yrs Fixed Mortgage Rate is at 20Yrs Highs.
30Yrs Mortgage Annual Payment U.S. Single Family Home, only Interest.
Housing prices tend to be “much stickier” than most costs, which means that when they rise we feel it more - and for longer (read - "for ever").
Housing prices do not compressed like just baked iPhone or iMac later in few years of its release.
- Does all af that mean that pre-covid levels of relative housing affordability are coming back?
- Sure "No". But at least American wages, which are still rising faster than before the pandemic thanks to increased worker power, will have a little chance to make up some lost ground.
The issue is still Federal Reserve' lagged tightening policy, that is "The Tail That Wags The Dog".
Stocks rallied to their best 9-weeks stripe over the past 20 years in November and December, 2023 (so-called 'Santa Rally') as investors raised their bets that the Fed is done hiking interest rates to fight inflation.
6Mo USCPI Inflation was at its lowest levels since Covid-19 pandemic in early 2023
Top 4 U.S. stock market Indices were in rally in 2023
The economy has cooled under the weight of rising interest rates, as the central bank intended, but remains surprisingly resilient.
Energy prices are down. Food prices are mellowing out. But the cost of having a place to live is still rising much faster than just about every other essential.
U.S. Consumer Price Index inflation
Headline inflation was up 3.1% from a year ago, and so-called "core" inflation, which excludes volatile food and energy prices, was up 4%. But the cost of shelter, which is the biggest component of the basket of goods the BLS uses to measure the cost of living, was up 6.5%.
"The shelter index was the largest factor in the monthly increase in the index for all items less food and energy," read the Bureau of Labor Statistics report accompanying the latest data on consumer prices.
"The shelter index increased 6.5 percent over the last year, accounting for nearly 70 percent of the total increase."
When the covid-19 pandemic hit, the cost of housing surged as those who could afford it sought out bigger homes and many city-dwellers transitioned to the suburbs.
What goes into Consumer Price Index
That and a glut of savings unhindered by low interest rates combined to exacerbate what had been a long-simmering Housing crisis the U.S.
But now that baked-in price hikes and rising mortgage rates spurred by tightened Federal Reserve monetary policy have put a bit of a damper on things, the housing market is also starting to cool.
U.S. Single Family Home Prices in "Bubble Mode"
30Yrs Fixed Mortgage Rate is at 20Yrs Highs.
30Yrs Mortgage Annual Payment U.S. Single Family Home, only Interest.
Housing prices tend to be “much stickier” than most costs, which means that when they rise we feel it more - and for longer (read - "for ever").
Housing prices do not compressed like just baked iPhone or iMac later in few years of its release.
- Does all af that mean that pre-covid levels of relative housing affordability are coming back?
- Sure "No". But at least American wages, which are still rising faster than before the pandemic thanks to increased worker power, will have a little chance to make up some lost ground.
The issue is still Federal Reserve' lagged tightening policy, that is "The Tail That Wags The Dog".
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Jan 11, 2024👉 US stock market is basically down on Thursday as a result of December, 2023 US CPI data.
👉 With Core CPI at 0.3% on monthly basis, shelter monthly inflation was 0.5%, or 6% on annual basis.
That gives 2.32% core CPI inflation with 37% weight of shelter (6.00 % * 37/100), or 60 percent overall.
👉 2 percent core CPI inflation (FED target) WILL NEVER be reached with current interest rate.
No chance for 6% shelter and deflation in everything else.
Just a math. Nothing more.
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Feb 13, 2024👉THE TAIL THAT WAGS THE DOG STILL WORKS.
👉 SHELTER UP +2.5 POINTS (+0.64% M/M, OR + 7.22% ON ANNUAL BASIS).
👉 2% CORE CPI (FED target) WILL NEVER BE REACHED DUE FED F#CKING STUPIDITY.
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May 15, 2024The US Bureau of Labor Statistics on Wednesday reported the April consumer-price index rose by 0.3% from March.
Shelter, gas prices remain sticky.
Notable call-outs from the inflation print include the shelter index, which rose 5.5% on an unadjusted, annual basis, a slowdown from March. The Shelter index (the largest US CPI component with near 32% weight) rose +0.38% month over month and was the largest factor in the monthly increase in core prices, according to the BLS.
Sticky shelter inflation is largely to blame for higher core inflation readings, according to economists.
Gold for June, 2024 delivery was last seen up, again near US$2,400 per ounce. Gold spot is +15.66% year-to-date now, while S&P500 is +11.86%.
Note
July 17, 2024👉 The US Bureau of Labor Statistics reported last week that the June shelter inflation rose by 0.15% M/M. This is the lowest 1Mo change for shelter inflation since January, 2021.
👉 12Mo shelter change is +5.13 percentage points (11% higher vs 5-years median, and this is the lowest split since October, 2021).
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