![]() ![]() While this research utilises data which is considered to be reliable, I have not independently verified the accuracy of the data utilised in this research. This research is general in nature, and does not constitute personal advice to any person. Important disclaimer-this may affect your legal rights: This economics research represents my own analysis, opinions and views and is not investment advice. Thank you for continuing to read and support my work. A healthy debate & conversation is the best way to help achieve that. ![]() As I incorporate this latest CPI data into my forecast, I hope to be in a position to have it ready to publish right here, for FREE, in the near future.Īs the readership of Economics Uncovered continues to grow, please feel free to also leave questions & comments below - I intend to nourish & build a community whereby we can all improve our knowledge and understanding of the important economic issues that impact our day-to-day lives. My work on a longer-term inflation forecast continues. If you would like to help support my work, please subscribe, and help me spread the word by liking and sharing this article. The costs of not doing so, could be extremely significant. The increasing tailwinds for lower inflation over the next 6-months greatly heightens the NEED for the Fed to begin more closely incorporating market rents into its inflation analysis, and articulating to this to public. Given that 1) durables prices are rolling over VERY quickly 2) gasoline prices are set to see SIGNIFICANT YoY declines by March should prices remain around current levels 3) food price deceleration is likely to soon occur given falls in underlying food commodities and 4) an abrupt shift in health insurance cost measurements, which is effectively baked in until September 2023, the lagging nature of rent measurement becomes all the more critical as it greatly distorts the underlying inflation picture.Īs I have been continuously warning, the lagging measurement of rents in the CPI risks SIGNIFICANT overtightening from the Fed, and greatly increases the chances of a SEVERE recession. While a lower portion of new leases from November-February, and a gradual convergence of the CPI’s rent related indexes to current market rental rates should see this figure begin to soften overtime (of which it seems October may have provided a small taste of), there is likely to be at least several months of relatively high MoM CPI rental price growth ahead. The impact of this shift on the broader medical care services component (~6.9% of the CPI) in October was significant, with this component seeing its MoM change falling from +0.7% in September to -0.5% in October! Instead of peak annual growth of 28%, the annual rate of health insurance growth now looks likely to be closer to NEGATIVE 40% come September 2023. In October 2022, the BLS re-adjusted the figure DOWNWARDS by 4%! While the health insurance component is only ~0.9% of the overall CPI, this is an ENORMOUS ~6 percentage point divergence. Over the year to September 2022, individual MoM change averaged 2.1%, with the YoY rate peaking at 28.2% in September 2022. In October 2021, this adjustment saw a MoM increase of 2%. The BLS computes this measure ONCE per year, with the overall change being reflected across the rest of the year in fairly evenly spread MoM changes. Instead of directly recording monthly health insurance costs in the CPI, the BLS instead indirectly measures health insurance costs based upon the retained earnings of health insurers. That factor is the BLS’ yearly adjustment to the CPI’s health insurance component. While I would want to see this repeated for another month or two to confirm such a significant potential shift, there is one VERY important factor to note which helped to drive this deceleration - importantly, we also KNOW that this will continue to support lower services prices over the next year. ![]()
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