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Warm inflation report spooks market

Discussion in 'Too Hot for Swamp Gas' started by citygator, Feb 15, 2024.

  1. Feb 15, 2024 #1
    citygator

    citygator VIP Member

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    Although the stock market is bouncing back today people do not know what to make of the inflation report this week. It eases but not as far as expected.

    I’d say with no excess labor pricing will be somewhat of a challenge so the new normal may be in the 3’s although who knows? Need more people in the US for certain.

    US inflation slows but remains elevated in sign that price pressures are easing only gradually

    WASHINGTON (AP) — Consumer inflation in the United States cooled last month yet remained elevated in the latest sign that the pandemic-fueled price surge is only gradually and fitfully coming under control.

    Tuesday’s report from the Labor Department showed that the consumer price index rose 0.3% from December to January, up from a 0.2% increase the previous month. Compared with a year ago, prices are up 3.1%.

    That is less than the 3.4% figure in December and far below the 9.1% inflation peak in mid-2022. But the latest reading is still well above the Federal Reserve’s 2% target level at a time when public frustration with inflation has become a pivotal issue in President Joe Biden’s bid for re-election.

    Excluding volatile food and energy costs, so-called core prices climbed 0.4% last month, up from 0.3% in December. On a year-over-year basis, core prices were up 3.9% in January, the same as in December. Core inflation is watched especially closely because it typically provides a better read of where inflation is likely headed.




    If you think falling prices are the answer they are not. Just ask China.

    https://www.cnn.com/2024/02/15/economy/deflation-explainer-us-china-economy?
     
    • Informative Informative x 1
  2. Feb 15, 2024 #2
    l_boy

    l_boy 5500

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    It seems like a chunk of it is still cpi housing inflation catching up to actual rents, which leveled off a while ago. This flows directly through CPI rents, and also indirectly through CPI owner equivalent rents.

    I would not put much stock in short term movements of these indicators either way.


    Beneath the Skin of CPI Inflation, January: Powell’s Gonna Have a Cow when he Sees the Spike in “Core Services” Inflation | Wolf Street




    https://fastercapital.com/content/R...g-the-Concept-of-Owners-Equivalent-Rent.html#


    See the lag in cpi rents still lags new rents.

    upload_2024-2-15_19-20-4.jpeg


    Notice the spike in OER last month. Not sure exactly why, either suddenly homeowners think they can rent their home for more, or surveys of actual home rents are registering the same phenomenon of apartment rents as above.

    upload_2024-2-15_19-20-56.jpeg




    Owners Equivalent Rent (OER) is a fundamental concept in real estate, which refers to the amount of money that homeownerswould pay if they rented their homes to someone else. It is an important component of the Consumer Price Index (CPI) in the United States, which measures inflation. understanding the calculation of Owners Equivalent Rent is essential for renters and homeowners alike, as it helps them to compare the cost of renting and owning a home.

    1. Calculation of OER: The calculation of OER is based on the rental value of a home, which is determined by taking into account several factors such as the location, size, age, and amenities of the property. The Bureau of labor statistics (BLS) conducts surveys to collect data on rental prices    , which are used to calculate the OER component of the CPI. The BLS also uses a hedonic regression model to adjust for the quality of the housing units, which helps to ensure that the OER reflects changes in the cost of shelter rather than changes in the quality of the housing units.
     
    Last edited: Feb 15, 2024
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  3. Apr 22, 2024 #3
    PITBOSS

    PITBOSS GC Hall of Fame

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    Downward pressure on the market as appears lowering of interest rates will be delayed
     
  4. Apr 22, 2024 #4
    G8trGr8t

    G8trGr8t Premium Member

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