- by New Deal democrat
Last month, I wrote that the March CPI report was the one we had been waiting for for the past three years. April’s was the second one in a row.
To cut to the chase, there were no major components besides shelter which qualified as “problem children,” i.e., sectors with 4.0% YoY inflation or more, and these were minor components: meat, motor vehicle repairs and insurance, and gas utility service. Even eggs no longer qualified. In the aggregate, consumer prices ex-shelter were once again totally somnolent.
Here’s my more detailed look.
First, here are the headline (blue), core (red), and ex-shelter (gold) m/m numbers m/m for the past two years:
For prices ex-shelter, which rose 0.2% last month, only May and June of last year, in addition to one month ago, were comparably low. Headline and core inflation, both also up 0.2% for the month, remain low for the last 24 months, but not totally sanguine.
Here is the same data YoY:
On a YoY basis, headline prices were up 2.3%, the lowest since February 2021. Core prices were up 2.8%, tied with last month for the lowest since November 2021, and CPI less shelter was up 1.4%, the lowest since last October.
The recalcitrant sector of shelter increased 0.3%, tied for the 2nd lowest monthly increase in the past 2.5 years. Breaking shelter down further, rent increased 0.3% for the month, and owner’s equivalent rent increased 0.4%, the same as in March. These were all slightly above average for the past 12 months, but all slightly lower, by less than -0.1%, than last April:
On a YoY basis, the increase of shelter at +4.0% was the lowest in almost 3.5 years, as was rent. Owners equivalent rent has been even more recalcitrant, at 4.3%, but is still at a 3 year low on a YoY basis:
For comparison, here is the YoY change in repeat home sales in the FHFA index vs. OER:
I continue to expect slow disinflation winding up somewhere around the 3.5% range within the next year.
The even more lagging problem child, transportation services (blue in the graph below), mainly motor vehicle insurance and repairs, increased 0.1% for the month, after decreasing -0.7% in March. On a YoY basis it was up 2.5%, the best reading in 4 years:
This deceleration has been driven mainly by a decline in airfares. Unfortunately FRED does not break out motor vehicle insurance, but they increased 0.6% for the month and 6.4% YoY, while the the cost of repairs (red above) increased 0.7% and 5.6%, respectively.
Further, the former problem children of both new and used vehicle prices gave further evidence that they appear to have nearly completed their normalization process. New car prices were unchanged for the month and up only 0.3% YoY, while used car prices declined -0.5% in April after a -0.7% decline in March, and are only up 1.5% YoY:
Finally, although energy prices rose 0.7% for the month, they are down -3.5% YoY:
As indicated in the intro, the only other remaining problem children are gas utilities, up 15.7% YoY, and meats and poultry up 7.0% YoY. Even eggs declined -12.7% for the month.
All is not rosy, since grocery prices for meats and eggs are an important basic group. But they are a very small share of total prices. The only significant problem children are either lagging (shelter vs. home prices; motor vehicle repairs vs. new vehicle prices), and even more lagging (motor vehicle insurance vs. repair costs). Indeed, ex-shelter consumer inflation has not even reached 2.5% in almost 3 years.
This was another good report which ought to allow the Fed to declare victory, if it chose to.
