October 28, 2020

car

automotive

Surge in Used Car Prices Keeps the CPI Positive

CPI Month-Over-Month Key Points

  • The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in September on a
     seasonally adjusted basis after rising 0.4 percent in August, according to the U.S. Bureau of Labor Statistics.
  • The index for used cars and trucks continued to rise sharply and accounted for most of the monthly increase in the seasonally adjusted all items index. The index for used cars and trucks rose 6.7 percent in September, its largest monthly increase since February 1969. 
  • The food index was unchanged, with an increase in 0.8 percent in September.

  • The energy index rose 0.8 percent in September as the index for natural gas increased 4.2 percent.

  • The index for all items less food and energy rose 0.2 percent in September after larger increases in July 


CPI and Core CPI Year-Over-Year 

CPI and Core CPI Year-Over-Year 2020-09

Year-Over-Year Key Details

  • Over the last 12 months, the all items index rose 1.4 percent for the 12 months ending September, a slightly larger increase than the 1.3-percent rise for the 12-month period ending August. 
  • The index for all items less food and energy rose 1.7 percent over the last 12 months, the same increase as the period ending August. 
  • The food index increased 3.9 percent over the last 12 months, while the energy index declined 7.7 percent. 

Poor Measure of Inflation

These indexes supposedly measure inflation.

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

Anyone who buys their own medical insurance will tell you their costs are up more than the reported 4.9%.

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.

Fed Myopia

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.

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

The Fed wants more inflation to make up for the lack of it in prior years. They are totally clueless how to measure it.

Mish

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