When people start cheering rising medical and rent prices as welcome “progress”, you know they belong back in the 5th grade along with economist Paul Krugman.
Today, some unknown Econoday writer cited such “progress” in regards to today’s reported CPI numbers even though month-to-month the CPI came in at zero.
Highlights
The headlines for the consumer price report look very soft but there are important offsetting pressures. The CPI came in unchanged in July, pulled back by a 1.6 percent monthly decline in energy prices and other weakness including flat prices for food and contraction in transportation. And it doesn’t look much better when excluding food & energy where the gain for the core is only 0.1 percent.
But two important categories — medical and housing — both show life. Medical care prices jumped 0.5 percent in the month for a year-on-year rate that leads the major readings, at a downright inflationary 4.0 percent. Housing costs rose 0.3 percent in the month with this year-on-year at 2.4 percent which, next to medical care, is the second highest on the list.
Total year-on-year prices are up only 0.8 percent with the closely watched core dipping 1 tenth to 2.2 percent. But the decline in energy and transportation can very well reverse quickly as could the lack of pressure in food prices. But medical and housing costs are a core of their own and should give policy makers confidence that their efforts to lift inflation are making incremental progress.
CPI Year-Over Year
This chart and the following table from the BLS CPI Report.
On the off chance you do not understand what you are supposed to be cheering, I created this handy-dandy scorecard.
Handy-Dandy Inflation Cheering Scorecard
Darn Good Things
- Food away from home up 2.8%
- Medical care commodities up 3.6%
- Tobacco up 2.9%
- Shelter up 3.3%
- Medical care services up 4.1%
- Hospital services up 4.6%
- Motor vehicle insurance up 6.3%
Upsetting Items
- Meats, poultry, fish -5.6%
- Dairy -3.1%
- Fuel oil -17.9%
- Gasoline -19.9%
- Electricity -1.0%
- Used cars and truck -3.7%
- Airline fares -4.6%
Many of you will be thinking: “Wait a second. Those ‘darn good things’ are up way more than that, but the ‘upsetting items’ are not down as much as stated.”
Tut-Tut. Please count your blessings!
That combination is even better news to the nameless Econoday robot and also to economists living in a bizarro solar system in some other galaxy.
For more on things outside this solar system, in a galaxy far, far away, please consider Krugman’s Arrow Theory Misses Target by Light Years.
Mike “Mish” Shedlock
My monthly medical costs have triple in price since ACA, so now I just put the cash in the bank and use it for whenever my needs arise. I’m worried though if I have some catastrophic medical issue occurs. The middle class is getting screwed in this stinking economy. Thankfully, my landlord hasn’t raised my rent!
Whoa now, just hold on there! Obama promised us that his Obamacare Program would control, even lower the cost of health care. So how can medical costs be leading inflation?
(sarcasm)
Bankers just make up nonsense to confuse the people, so bankers can keep secretly confiscating stuff with the printing press. Inflation is primarily a bank loan bailout. Inflation is the bank’s war on the people, especially the fixed income elderly.
Medical inflation is the bank’s war on Medicare/Medicaid budgets, and education inflation is the bank’s war on states/cities. Medical inflation is also the bank’s war on US corporations, since America is unique in utilizing employer based health care.
Health care and auto insurance are the 2 biggest scams in the country. Interesting that both are required by either the gov or banksters (assuming they’re not one and the same).
Bought my 18 year old boy a mustang (6 cylinder). He deserved it. High School valedictorian and he got a full ride scholarship to College. First year auto insurance: $4000. Whaaaat??
Second year (switched to Geico) $1900. Better. This year, switched to Allstate. $540. And it is still too much.
Just run PIP on me and the wife per State statute.
$540 for a year. Where do you live that you can get insurance that cheaply?
Here in Florida I pay 1800 a year after switching from All State to State Farm. That’s with 20+ years driving with no accidents/claims/DUI/tickets etc. Now I do have collision for $500-600 (even though I paid cash for my car) so technically I could get it down to 1200 range.
Still crazy expensive compared to the rate a 21 year old is paying.
So motor vehicle insurance is up 6.3% but a used car/truck is only down 3.7% so up 6.3% is bigger than down 3.7% there must be huge inflation.
In other news, if today your boss said he would give you a 100% raise for the year but tomorrow would have to give you a 50% pay cut…..I suspect you would think you were getting one over on him.
Insurance is in trouble with the lack of interest rates.
Brian under your scenario I calculate that the net result would be a doubling of your pay for one day. Hey better than nuttin!
I don’t think insurance was around 150 yr ago…another ponsi…
in 50 yrs of driving, 2 others ran into my truck…how can you not see a truck? it cost my insurance about 5K for repairs for the both of them…..i’ll rate the average premium for me at $750 a year time 50….equals$ 375,000 I paid to “insure”. expensive security? or such a deal? I ask you? let’s see I threw away $370 K for the fear they instilled in me. or ok, it’s how things are done. I can complain as long as I pay.
and i’m not saying what an auto loan costs.
on to greener pastures? ok.
when you figure the average 30yr mortgage , the owner of the pay forward loan, pays 3 times the amount borrowed. borrow 100K, end up paying 300K.
for average American….right there is a cool half million….of wasted money.
just happened to get out the calculator and find some reality.
wanna bitch, how about to yourself and these ideas.
everyone seems to moan over Hillary or trump and miss the whole reality of what is hurting them.
in the old days neighbors helped to rebuild a tragic loss of a home or a barn…..now we pay the scam of insurance….
they can’t play the markets, so its’ now oh woe is us , you pay our profit for us, thank for being stupid.
we are bailing out the insurance business, and the medical infrastructure.
ok discuss that?
Fair enough however the point is that Mish’s post is a hot mess of basic math errors. 3% of a car’s price is usually a pretty decent number compared to 6% of the cost of auto insurance. Medical bills are costly, however I don’t have medical bills all the time but I buy gas every week or more. The only intelligent way to compare prices in general is to make an index of the type and quantity of stuff you typically buy and compare that from one period to another.
This however is just a bunch of cherry picked data points out of thousands put into a post. Suppose you were looking at a mutual fund and wanted to simply know how well it did last quarter. Instead of just telling you that, though, the data just gave you a list of stocks the fund had purchased and then sold along with the associated prices. No data on how many shares those transactions consisted of or how large those profits and losses were to the total fund itself. You’d laugh it off as an exceptionally silly marketing gimmick that provided you with no information of value.
Pray tell – what math error did I make?
If anything the “math” error is the BLS – not me.
It’s absurd to believe medical costs up as little as they say. And owner’s equivalent rent is a joke.
Those with a mortgage don’t have a rent. Those looking to buy will see costs on a major item up enormous.
The idea one can take all of this stuff and average it out is absurd. But that’s what the CPI does.
Indeed, Mish is just the messenger here. I think we’re all in agreement that these numbers are a bit debased from reality.
With regard to medical costs, might be worth emphasizing that “pricing of health insurance policies is not included in the CPI” (per http://www.bls.gov/cpi/cpifact4.htm). While “Motor vehicle insurance” shows up as its own line item, you don’t see one for health insurance. Granted, the amount any given consumer actually outlays is gonna be wildly variable on employer contributions. But that’s still an absurdly huge chunk of consumer spending to just drop on the floor.
1. Your math error is comparing percentages with different bases. If a mutual fund manager told you he lost 5% on his Apple trade but scored 25% on his Tesla trade that would tell you absolutely nothing about his performance. How much Apple stock did he lose 5% on? How many shares of Tesla? Depending upon the answer this fund manager could be one of the best on Wall Street or doing horribly.
2. Of course you average it all together. That’s what a mutual fund does when it reports its performance. It averages all its gains and losses in their relative weights so rather than trying to make a list of all the trades it does, you just have to look at the total change in value. You do the same with prices overall. You make a basket of the stuff you buy and how much it costs in one time period and then see what that basket costs in another.
3. Housing is unusual because it is the one good that many people own the capital to produce…yet the logic behind it is pretty air tight. A house is something you can own but it also provides you with a service (i.e. someplace to live). This is easy to see if you remember if you have somewhere else you can go then you can rent your house out for money. Owning a house is a bit like owning a factory. You can sell the output of the factory or you can use the output for yourself. This is a different thing than selling the factory itself.
Local rent was raised until they advertise ‘immediate move in’. The limit was found.
When the goal is to extract maximum benefit for minimum cost for the leeches in the real estate racket, the goal is to prevent the natural effect of rising prices: inducing more producers to add to supply. That way, out of all the money spent on housing, very little goes to those doing something useful for housing, meaning actually producing houses. Instead, all the money goes to those dicking around with existing, depreciating stock. Lending against it, collecting commissions from trading in it, and simply owning it.
So, now that housing costs are way beyond merely unsustainably high, the race is on to use zoning and other oppressive measures to bail out the insiders. Meaning, creating a “new normal”, where instead of young people getting their own place, they are now relegated to sharing small apartments with someone they don’t particularly care to live with. Soon, they will be expected to share a room…..
Never mind the cost of constructing new houses is falling every year. “Allowing” such an “atrocity”, would mean connected insiders would have to give up some of their loot for the benefit of people who do something as useful as actually building stuff. Can’t have that, in our progressive dystopia. I mean, just imagine the horrors of new houses in California built profitably for $150K.. What terrible things wouldn’t that do to the idiot in hock for a million for a ramshackle and the bank who lent him the money. So, let’s come up with retarded excuses for why it is OK to turn young people into indigents instead!
‘cost of constructing new houses is falling every year?? Where exactly ? in fantasyland? The cost of construction (or remodeling / additions) in a major metro area like Greater Boston or the suburbs around NYC is almost obscene. The cost of permits, fees, taxes etc and regulations is absurd in these areas. Not to mention labor costs. and maintenance / repairs
The vehicle market about to get interesting.
Used vehicles -3.7% year over year (courtesy of millions and millions of newish vehicles coming off leases … with no end in sight).
Today’s IP report had new vehicles and parts up over 1% for July.
Thank you monetary policy for stuffing the channel to unimaginable level.
Many if not most business cycle economic theories hold that the peak is reached and the downturn begins when inventories are too high. Ben & Janet were supposed to smooth out & eliminate downturns. Hmmm…. How about this one:
“in 2003, Robert Lucas, in his presidential address to the American Economic Association, declared that the “central problem of depression-prevention [has] been solved, for all practical purposes.” Unfortunately, this was followed by the 2008–2012 global recession.”
~ wikipedia
again where are used vehicle prices falling? In fantasy land?? Many used cars sitting on the lot are these high mileage (Over 50,000 on odometer) cars where the price doesn’t make sense compared to buying new. Many people are just choosing to lease — Ex. New jeep Cherokee for $699 a month & $181 a month for insurance.
“Many people are just choosing to lease — Ex. New jeep Cherokee for $699 a month & $181 a month for insurance.”
Well, DUH
You are making my point. Leasing has ramped up quite a bit the past few years. Over 30% of new vehicle sales (which are between 17 to 18 million / year) are leases. Millions of vehicles a year are coming off leases NOW. Low mileage newish used competing with way overpriced (courtesy of easy credit that will blow up) new vehicles.
Maybe they can figure out a way to add the cost of excess regulation into the GDP mix and drive up the ficticious CPI and GDP. What a political game changer.
https://fee.org/articles/more-regulatory-jobs-means-fewer-real-jobs/?action=push&utm_medium=push&utm_source=push_notification
In a way, they already did. The Gross Domestic Product by US gov’t calculation includes government spending. However, while the gov’t is always spending more, it produces nothing. Imagine what the GDP numbers would be like without that phony positive.
Indeed, GDP is a scam because it measures inputs, not outputs, and the CPI is a scam because government employees want to keep their jobs, so they just make sure they get the result that the WH wants….
Paul Krugman just invented a solar panel that works at night by plugging it into the grid.
I just read that Aetna has dumped Obamacare. Who did they follow? United Healthcare? Last one to leave turn out the lights. This is certain to raise consumer medical costs even higher. The gov won’t keep subsidizing the costs. At some the consumer gets screwed badly. This is going to really get ugly down the road AFTER Obama moves out of the White House. The pieces are starting to fall apart in real time. Obama will leave all the clean up and dirty work for the one who follows him. I don’t think Trump is intentionally throwing the election – but if he is I can’t say I blame him. Whoever moves into the White House in January 2017 will get caught holding the bag and go down in history as the most hated President in the nation. Watch and learn.
It would be funny if Hilary is forced to shut down Obamacare…
Whomever the next loser in the White House, this “free shit” fantasy is going to have a serious collision with reality — and it no longer matters what congress or the supreme senile court thinks.
PS — according to the Obama regime itself, Medicare (the old people program) will be cash flow bankrupt in 2018… and that assumes the Obamacare fuck up doesn’t end it sooner.
“Free” healthcare was a lie from the beginning, as anyone with a brain knows. Obama will go down in history as the most stupid president ever — which considering the competition is saying a lot.
No wonder Obama refused to show us his college transcripts. Scholastically he was probably as dumb as a stone. His only saving grace was his skin color. Why would a Harvard educated attorney choose to become a Community Organizer? That should have been our first clue that the man is as shallow and superficial as they come. He’s a classic flim-flam man. A con artist. And a good one at that. He fooled over half the US population.
The Obama regime fixed (as in rigged) their statistics, like CPI — but they never fixed the economy.
Obama sucks
Some people wish everyone would just forget about this admission; politicians count on voters having short memories:
Jon Gruber is supposedly has a full time job as a professor at MIT, charging obscene tuition rates for teaching antiquated concepts — AND he also has a full time job advising on Obamacare?
Gruber was paid $500K consulting for Obama, but “only” $200K as a not-really-full-time professor — the incentives are clearly there to focus on Obama fraud, not MIT students
Seems like a few underemployed alum of MIT might want to take a page from unemployed Harvard law grads and sue their alma matter.
If “full time” professors are spending so much time (and getting most of their income) on outside projects, they clearly are not full time professors at all
The only difference between Obamacare and the Prohibition, is that the Prohibition was at least economically viable (neither were very popular)
Both presidential candidates still day dreaming about all the “blah blah blah” they think they are going to do — but whomever “wins” is going to face a health cost crisis, a debt crisis, an underemployment crisis, and a capital city filled with clueless generals fighting the last war.
Wonder if Obama has been reading up on Nixon’s low profile lifestyle after “voluntarily leaving” the White House? Could come in really handy in a few months
‘If you think health care is expensive now, wait until you see what it costs when it’s free.’