Year-Over-Year CPI Up Most in 6 Years, Bond Market Reacts with Big Yawn
The BLS Consumer Price Index summary shows the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in May on a seasonally adjusted basis after rising 0.2 percent in April.
- The gasoline index increased 1.7 percent, more than offsetting declines in some of the other energy component indexes and led to a 0.9-percent rise in the energy index.
- The medical care index rose 0.2 percent.
- The food index was unchanged over the month.
- The shelter index rose 0.3 percent in May.
- The indexes for new vehicles, education and communication, and tobacco increased in May, while the indexes for household
furnishing and operations, and used cars and trucks fell.
- The indexes for apparel, recreation, and personal care were unchanged.
Year Over Year CPI
Year-Over-Year CPI looks like it's on on ominous trend buts that largely due to easy comparisons and rising energy prices. Year-over-year food at home is up only 0.1%. Some will object to that, I don't.
Food away from home rose 2.7%, likely reflecting higher wages.
The problem spot is shelter, and it's a big one. The shelter index is up 3.5%.
Month-over-month, the CPI looks more benign but once again shelter is hot. It's up 0.3% for the month.
Worse yet, shelter is understated in the CPI because it does not include actual housing prices.
The bond market reacted to this news with a big yawn.
Other than shelter, a big yawn is appropriate. The Fed blew another real estate bubble, junk bond bubble, and equity bubble. When those pop, deflation, not inflation will be the concern.
Mike "Mish" Shedlock