"I’ll bet you did not know that housing makes up 42% of the Consumer Price Index (CPI). All the rest of it, food, energy, clothing, recreation, education, transportation, toys, cosmetics, etc. makes up the other 58%. So whatever housing prices are doing has a big effect on the headline CPI number.
The softness of housing prices continues to artificially supress the growth of the CPI inflation rate. Some Fed officials are even saying that they need to strive for higher inflation to help the economy rebound, in spite of the Fed’s mandate to promote “stable prices”.
Most people have heard about the CPI variant that excludes food and energy. But not many people outside the economics community know that the Bureau of Labor Statistics also publishes a long list of alternate permutations of CPI calculations, including or excluding various components. This week’s chart shows a comparison of the CPI-Housing growth rate versus “all items less shelter”, which is that other 58% of the CPI calculation I mentioned above. When we exclude the contribution of the housing price data, we can see that the inflation rate for everything else is already up to 4.68%..."
at http://pragcap.com/weak-housing-conceals-higher-inflation
The softness of housing prices continues to artificially supress the growth of the CPI inflation rate. Some Fed officials are even saying that they need to strive for higher inflation to help the economy rebound, in spite of the Fed’s mandate to promote “stable prices”.
Most people have heard about the CPI variant that excludes food and energy. But not many people outside the economics community know that the Bureau of Labor Statistics also publishes a long list of alternate permutations of CPI calculations, including or excluding various components. This week’s chart shows a comparison of the CPI-Housing growth rate versus “all items less shelter”, which is that other 58% of the CPI calculation I mentioned above. When we exclude the contribution of the housing price data, we can see that the inflation rate for everything else is already up to 4.68%..."
at http://pragcap.com/weak-housing-conceals-higher-inflation
