There is almost no inflation in June, except for the fictitious shelter measures

– by a New Deal Democrat

The message from this morning’s consumer inflation report was the same for almost everything except the dummy shelter-in-place measures: a sharp slowdown across the board.

Let’s take a look:

Core CPI up 0.2% month-on-month and 3.1% year-on-year (lowest since March 2021)

Core CPI rose 0.2% month-on-month and 4.9% year-on-year (lowest since October 2021):

CPI less shelter up +0.2% and 0.7% y/y (lowest since February 2021):

New and used vehicles: 0.0% and -0.5% month-on-month respectively, and +4.1% growth and -5.2% year-on-year decline respectively:

Food is up 0.1% month-on-month and 5.7% year-on-year:

But food prices rose by just 0.3% in the 4 months since February:

Transport services (spare parts, repairs, etc.) were also a hotspot and also slowed to 0.4% month-on-month and 8.2% year-on-year growth (but down from a peak of 15.2% year-on-year last October:

Finally, owner-equivalent rent is up 0.4% on a monthly basis:

and 7.8% y/y (down from an all-time y/y of 8.1% y/y in April):

Here’s how it compares to home prices as measured by the Case Shiller National Index on an annualized basis (/2.5 for scale):

Since the beginning of this year, monthly OER increases have decreased from 0.8% to 0.45%. Annualized OER is likely to be below 4.0% and perhaps below 3.0% by the end of next winter.

To recap: with the exception of the dummy shelter measure, the only inflation “hotspots” left are new vehicles (but which are resolving as supply chain issues are finally resolved) and transportation services. Food inflation has generally stalled over the past 4 months.

And if the actual new increase in rents and house prices were replaced by the dummy OER measure and the 12-month average used for leases, core inflation would only rise by about 0.8% year-on-year, and core inflation would rise by 3.0%.

But I’m sure there’s some sticky price somewhere, blah blah blah, that will justify the Fed’s continued aggression.

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