CPI Services Increase by 5% Year-Over-Year: Is it Real or Inflated?

CPI data shows inflated shelter costs, but bond market will reveal true economic signals. Watch the price for accurate insights.

In the latest CPI report released on June 12th, 2024, there were some concerning aspects regarding CPI - Shelter that seemed inflated and potentially sending inaccurate signals. The CPI Services component, excluding shelter, showed a year-over-year inflation rate of 5%, which was surprising given the overall positive outlook of the report. This data was confirmed by various sources, including Briefing.com and Calculated Risk.

Back in early 2023, Raphael Bostic of the Atlanta Fed discussed the need to cool down services growth in the US economy, as it was still too hot despite predictions of a looming recession. Services now make up a significant portion of the US GDP, with goods inflation remaining flat or negative. Real-time rent data also seemed to contradict the shelter component of the CPI, suggesting that actual shelter inflation may be overstated.

Technical analysis by experts like Charlie Bilello and Alan Greenspan's observations from the 1990s highlight the importance of looking at price action across various time frames to get a true understanding of economic indicators. The recent bond rally, coupled with an increase in jobless claims, may indicate a weakening US economy, but further revisions and data are needed to confirm this.

Ultimately, the bond market will provide the most accurate signals regarding CPI - Shelter inflation, despite the potential discrepancies in the data. This article may seem a bit technical and detailed, but it's essential to consider all factors when analyzing economic trends. Remember, this is just an opinion and not financial advice. Thanks for reading!