Alan Reynolds writing:
Consumer price index (CPI) inflation has been flat for the past two months. Over the past 12 months, food prices have risen 1.1% and energy prices have risen 1%. Yet headlines continue to focus on the 12-month averages of 3% for total CPI and 3.3% for “core inflation” (excluding food and energy). But there’s a big problem: those 3% to 3.3% numbers don’t reflect a comprehensive measure of inflation, because they’re largely dominated by housing costs.
Widely criticized Bureau of Labor Statistics (BLS) Estimates of rents and rent equivalents to owners (a price that no one pays) account for one-third of the total CPI and more than 40 percent of the core CPI.
Reynolds points out that extreme house price estimates are also problematic for another reason: They lag behind reality by 12 to 18 months. Of course, because there is a lag, we don’t know what’s happening with house prices in recent months.
But without housing prices, inflation has been low. Reynolds writes:
Here’s the unreported good news: Outside the shelter, CPI inflation and core inflation have only increased by 1.8% over the past 12 months and have remained stable or decreased over the past two months. (emphasis in original)
What he means, of course, is not that CPI inflation and core inflation pink only 1.8 percent over the past 12 months; he means that CPI inflation and core inflation were only 1.8 percent over the past 12 months.
