by Karl Denninger, Market Ticker:
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.8 percent in February on a seasonally adjusted basis after rising 0.6 percent in January, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 7.9 percent before seasonal adjustment.
Gasoline was only up 6.6% in the February index. Most of the damage had not yet been taken; that’s in the last two weeks and will be in the next report. Groceries were up 1.4% on the month which annualizes to 18%, a figure that is worse than the early 1980s inflation and will flat-out ruin lower and middle-income Americans.
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Shelter was the largest non-food and fuel increase, which also monkey-hammers modest-income persons.
Prices for used vehicles dropped, no doubt due to the insanity of large trucks which of course are fuel pigs and most people buy them because they like them, not because they tow or haul something. When the pump shuts off at $100 before the tank is full they suddenly get a lot less attractive, don’t they?
The fiction of “owners-equivalent rent” continues. Actual house prices have risen astronomically yet OER is only up 4.3%. Anyone who believes that figure is nuts. Incidentally this intentional distortion was part and parcel of the housing crash in 2008 and why we’ll have another one; rentals have been priced exclusive of capital cost recovery for quite some time and that’s a problem because the owners have thought they’d be “ok” due to capital appreciation in the asset value. Then Covid hit, the moratoriums came and the rocket-shot in price that “rescued” what was otherwise a flat-out disaster that would have bankrupted basically everyone who owned and rented out single-family residences. The problem is that as with last time this “asset value” addition is a mirage; liquidity will be forced to tighten as when you can’t buy food you riot and a burned house is worth zero. You can’t print chickens, cows, wheat and corn — you have to grow them and when the input costs go up so does the price in the store.
Thus these intentional (but transparent and fully-visible) lies in the CPI table, specifically OER, which I’ve outlined for over a decade as the cause of much of bad policy by both The Fed and Government, but which was intentionally put into the computation by the government itself, is going to lead to the same sort of bad outcome.
Insurance is going to take off too. Unfortunately that’s a “sunk cost” for virtually everyone in some form or fashion. If you think car insurance is going to get nasty health insurance was up 1.9% on the month which annualizes to 25.3%. Every single employed person either pays this directly (e.g. Obamacare) or it is a direct deduction from their wage and salary offer if the employer is forced to provide it for him or her with it commonly being $500 a month — so this is $100 per month, or over $1,000 a year that is going to come directly in the form of less money in your pocket or even firings if you no longer are worth the extra $100 a month to the employer!
The annualized change in price for goods, both durables and non-durables, are all up double-digits with durable goods approaching 20%. The sharp rise in fuel costs is going to force that to be maintained because absolutely everything is moved using them during some phase of production, never mind final delivery to the store.
This was all pre-Russian invasion too; the impact of that will be in next month’s report.
This is what America voted for, remember? Joe Biden told people during the campaign that he was going to eliminate fossil fuels and thus, for once, a politician told you the truth — that you will get screwed if you elect me — and he did exactly that which you in fact approved and voted for.
