–Dominant Shelter Index +3.2%/12 M0s, An Upward Pull
WASHINGTON (MaceNews) – The key signposts within the Consumer Price Index, the annual rates of increase for shelter and rents, show strong upward pressure on the inflation rate, increases through January above 3%.
The Federal Reserve reflexively looks past energy as an important long-term inflation determinant, disdains the CPI’s emphasis on residential housing costs and so is unlikely to be influenced by the report one way or the other.
The Bureau of Labor Statistics report on consumer inflation Wednesday was restrained by the big drop in gasoline as expected, a 5.5% decline for the month that’s part of a 10.1% drop in 12 months. The all-items index was unchanged after seasonal adjustment and the annual inflation rate was similarly constrained at 1.6%.
The core items went the other way, with shelter, apparel, medical care, recreation, and household furnishings and operations up. Food was up a modest 0.2% and the 1.6% increase in 12 months is not pushing the inflation rate. For the fourth month, the core rate was up 0.2%.
The dominant shelter index, 33% of the index, shows a 12-month rate of increase of 3.2%, a point above the annual rate of core inflation. Owners equivalent rent, 24% of the index, is up 3.4% over a year. The January 0.3% for both has become typical. The Personal Consumption Expenditure index the Fed prefers as its inflation market lacks the residential housing emphasis.
Apparel’s unusual 1.1% upward spike in January is unlikely to be sustained, give the 12-month rate of increase for the category is just 0.1%. Medical care costs are roughly on trend at 0.3% for January and at 2.4% for the year, are tracking the overall core rate, not pressing it up.