CPI Declines Due to Gasoline But Food and Shelter Costs Jump Again – Mish Talk

January 13, 2023

Please consider the BLS Consumer Price Index report for December.

Key Details Month-Over-Month

The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.1 percent in December on a seasonally adjusted basis, after increasing 0.1 percent in November.
The index for gasoline declined 9.5 percent and was by far the largest contributor to the monthly all items decrease.
The energy index decreased 4.5 percent over the month.
The the fuel oil index was down 16.5 percent but energy services including electricity and piped natural gas rose 1.0 percent and 3.0 percent respectively.
The food index increased 0.3 percent over the month with the food at home index rising 0.2 percent.
The shelter index rose 0.8 percent.
The index for all items less food and energy rose 0.3 percent in December, after rising 0.2 percent in November.
Indexes which increased in December include the shelter, household furnishings and operations, motor vehicle insurance, recreation, and apparel indexes.
The indexes for used cars and trucks, and airline fares were among those that decreased over the month.

CPI Year-Over-Year

CPI Data from BLS, chart by Mish

CPI Year-Over-Year Details

The all items index increased 6.5 percent for the 12 months ending December. This was the smallest 12-month increase since the period ending October 2021.
The all items less food and energy index rose 5.7 percent over the last 12 months.
The energy index increased 7.3 percent for the 12 months ending December.
The food index increased 10.4 percent over the last year.
The index for shelter rose 7.5 percent.

Spotlight Shelter

National Rent Prices Decline Again, But Reports Are Very Misleading

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Shelter jumped again as expected in this corner.

Economists have generally been expecting shelter costs to decline based on declines in national rent indexes but I have not been in that camp.

On January 5, I cautioned National Rent Prices Decline Again, But Reports Are Very Misleading

The key idea is national rent index is for new leases not existing and there were enormous increases for eight months in 2022 that have yet to be smoothed out by the BLS.

Looking Ahead

Rent: The pace of increases in rent will slow at some point but don’t expect anything like the above chart in National Rent prices. Rent declines are unlikely at least until the massive pipeline of apartments under construction is completed. Even then, that may be more of a local thing than nationally.
Gasoline: According to the AAA, the price of gasoline is about where it was a week ago and a month ago. With China reopening there is upward pressure on energy. There is also upward pressure due to more Russia sanction talk by the US and EU.
Food: The cost of fertilizer has declined and with that some expect the price of food will decline as well. Perhaps so, but color me skeptical. Corn futures have been steady and soybean futures have generally been rising. Cattle futures are close to the top of their range.