Originally posted by Mish Shedlock at Mishtalk.com:
Looking ahead, year-over-year comparisons are very difficult. That’s on top of tariffs.
CPI year-over-year data from the BLS, chart by Mish
The all items index rose 2.3 percent for the 12 months ending April, after rising 2.4 percent over the 12 months ending March.
The April change was the smallest 12-month increase in the all items index since February 2021.
Major Resistance
- April does not have a tariff impact. That won’t be true going forward.
- The monthly comparisons (numbers to beat for improvement) are about to get very difficult.
CPI Month-Over-Month SA Comparison
CPI month-over-month data from the BLS, chart by Mish
On a seasonally-adjusted basis the next four comparisons are 0.04, 0.00, 0.14, and 0.18.
If the BLS reports higher numbers, the year-over-year numbers will rise.
Since year-over-year comparisons are usually made unadjusted, here’s the unadjusted chart.
CPI Month-Over-Month Not Adjusted Comparison
For the next 8 month the easiest number to beat is 0.17. Anything over that string of numbers will cause the year-over-year CPI to rise.
I would focus on the month-over-month SA chart because the seasonal adjustments are screwy.
If the BLS reports 0.2 percent and 0.3 percent for May and June, seasonally-adjusted, the year-over-year CPI will be approximately 2.8 percent in June.
Shelter Factor
Shelter is 35.426 of the CPI, with OER at 26.176 percent and Rent at 7.463 percent.
Rounded to two decimal places rent is 0.34 percent and OER 3.6 percent.
If these components have bottomed as I have shown, the CPI might be very ugly for a few months.
If that last arrow up is incorrect, then shelter could alleviate some impact from tariffs.
The Base Case
Tariffs plus difficult comparisons have put a floor on falling CPI year-over-year.
Shelter may compound or help alleviate those impacts.
CPI Better than Expected Thanks to a Drop in the Price of Food
Earlier today I noted CPI Better than Expected Thanks to a Drop in the Price of Food
The CPI rose 0.2 percent vs. the consensus estimate of 0.3 percent. The good news stops there.
The bond market reaction to this report was negative. Yields rose at the long end of the curve.
The 10-year note is us to 3 basis points to 4.48 percent and the 30-year long bond is up 5 basis points to 4.93 percent, both higher despite the CPI being better than expected.
That’s arguably the best measure of the report.
But also weighing on the bond market is a massive increase in the budget deficit and debt if Trump gets the “One Big Beautiful Bill” that he wants.
Spending is up a whopping 58 percent in six years and Congress doesn’t want to challenge Trump on it.
Neither the technical pattern nor the fundamentals have changed.
