Broad Rebound in Consumer Prices But Still Benign Year-Over-Year

Prices rallied for the second month but year-over-year prices are still benign.

CPI Up 0.4% in August

The Consumer Price Index for August increased 0.4 percent in August on a  seasonally adjusted basis after rising 0.6 percent in July. 

Key Points 

• The monthly increase in the seasonally adjusted all items index was broad-based; a sharp rise in the used cars and trucks index was the largest factor, but the indexes for gasoline, shelter, recreation, and household furnishings and operations also contributed. 
• The energy index rose 0.9 percent in August as the gasoline index rose 2.0 percent. The food index rose 0.1 percent in August after falling in July; an increase in the food away from home index more than offset a slight decline in the food at home index. 
• The index for all items less food and energy rose 0.4 percent in August after increasing 0.6 percent in July. 
• The sharp rise in the index for used cars and trucks accounted for over 40 percent of the increase
• The indexes for shelter, recreation, household furnishings and operations, apparel, motor vehicle insurance, and airline fares also rose. 
• The indexes for education and personal care were among the few to decline. 

CPI and Core CPI Year-Over Year

(Click on image to enlarge)

Year-Over-Year Details

• The all items index increased 1.3 percent for the 12 months ending August; this figure has been rising since the period ending May 2020, when the 12-month increase was 0.1 percent. 
• The index for all items less food and energy increased 1.7 percent over the last 12 months. The food index increased 4.1 percent over the last 12 months, with the index for food at home rising 4.6 percent. 
• Despite recent monthly increases, the energy index fell 9.0 percent over the last 12 months.

Poor Measure of Inflation

The CPI is a scam, purposely designed to understate what's really happening with prices.https://t.co/wsdfH355NB

— Mike "Mish" Shedlock (@MishGEA) September 25, 2019

These indexes supposedly measure inflation.

They do nothing of the kind. The indexes do not include home prices, only rent.

The purported medical inflation is a joke. Anyone who buys their own medical insurance will tell you their costs are up more than the reported 5.9%.

Anyone in college has not been pleased with the rising cost of tuition and rent in college towns.

And anyone with an ounce of common sense knows the current stock market bubble is a measure of inflation.

Focus on Consumer Inflation is Horribly Wrong

Stock prices are not "consumer" inflation, but realistically home prices are. 

Regardless, the Fed's focus on consumer inflation ignoring housing, while averaging medical costs with those on company plans and Medicare is just plain wrong.

Central banks’ seriously misguided attempts to defeat routine consumer price deflation is what fuels the destructive asset bubbles that eventually collapse

For a discussion of the BIS study, please see Historical Perspective on CPI Deflations: How Damaging are They?

Fed Can Blame Itself

I am not blaming the Fed for the coronavirus and these shocks.

However, I am blaming the Fed for its erroneous inflationary tactics that blew three of the biggest economic bubble in succession: 2000, 2007, 2020.