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

CPI-2016-08B

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

CPI-2016-08A

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