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CPI for all items rises 0.4% in August, 2.9% YoY; shelter and food up

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Re: CPI for all items rises 0.4% in August, 2.9% YoY; shelter and food up

#51

Post by skeezyboy »

marticode wrote: post #9
tlogan wrote: post #6

If you look at the numbers, the key driver is rents (technically listed as "shelter"). Shelter has a large weight in the CPI basket, and its 12-month increase was 3.6% (comparing to 2.9%) Rents in San Francisco (and LA) are skyrocketing. And that cannot be easily explained. Not sure what’s causing this. What do you think?

Lack of construction is likely the problem. High financing costs, expensive construction material (a lot of it is imported, like Canadian wood) and disappearing construction workers is probably all contributing.

> expensive construction material (a lot of it is imported, like Canadian wood)

Im sorry but the single justification for the richest country on the planet still building houses out of wood was that it was cheap and abundant. Now I find theyre importing at increased cost.... so tell me again why you all live in wooden sheds?

Re: CPI for all items rises 0.4% in August, 2.9% YoY; shelter and food up

#52

Post by throw0101d »

ACCount37 wrote: post #27
Aurornis wrote: post #11

Earlier quoted context omitted.

> The US may import a lot of things... but probably not shelter. Housing requires construction materials, tools, and fixtures. Tariffs increase the cost of all of these, including domestically produced materials due to the second order effects.

It also requires human labor, which isn't impacted by tariffs directly, but may be impacted by other government actions in the US. Such as the ongoing high profile crackdown on illegal immigrant labor.

> It also requires human labor, which isn't impacted by tariffs directly, but may be impacted by other government actions in the US.

If people think prices will go up they will insist on bigger raises. It's why expectations can be as important as what 'actually' happens:

* https://en.wikipedia.org/wiki/Wage–price_spiral

Re: CPI for all items rises 0.4% in August, 2.9% YoY; shelter and food up

#53

Post by cs702 »

The Fed's inflation target is a long-term stable 2% annual increase in prices of personal consumption expenditures (PCE):

https://www.federalreserve.gov/economy-at-a-glance-inflation...

The motivation for 2%/year is that when inflation is lower, businesses and consumers tend to hoard more cash, instead of spending or investing it, reducing economic activity, and when inflation is higher, it tends to become self-reinforcing and can spiral out of control: Businesses raise prices and employees demand higher pay to keep up with expected rising costs. Deflation (prices decreasing every year) is undesirable, because it forces businesses and consumers to spend and invest less, but no one ever wants to earn less (e.g., employees don't like pay cuts), so deflation tends to shrink economic activity even more, and in the worst case, can induce a depression, with businesses spending and investing less because consumers are spending less, and consumers, in turn, spending less because businesses are spending and investing less. I'm of course oversimplifying, to keep things short.

Inflation remains above target, but thankfully, as of now, it doesn't appear to be self-reinforcing. I mean, I hope it isn't: https://news.ycombinator.com/item?id=45182111

Re: CPI for all items rises 0.4% in August, 2.9% YoY; shelter and food up

#54

Post by shoo »

Aurornis wrote: post #11
shoo wrote: post #7

I've heard a few economists interviewed about the estimated impact of tariffs, an argument is that tariffs should lead to higher prices for US consumers, but as a one-time price increase, not a sustained level of price inflation. That said, it's curious that this CPI news release highlighted "shelter" as a driver: > The index for shelter rose 0.4 percent in August and was the largest factor in the all items monthly i…

> The US may import a lot of things... but probably not shelter. Housing requires construction materials, tools, and fixtures. Tariffs increase the cost of all of these, including domestically produced materials due to the second order effects.

I agree! But the US only adds about 1% new dwellings each year.

So I'd naively expect that 99% dwellings are existing housing stock and so might not to be sensitive to increased construction costs, because they've already been constructed.

I was wondering if BLS might use a model of estimated replacement cost in their CPI estimate, incorporating construction costs, but from a quick skim read it doesn't sound like they do that.

For estimating rental costs, they ask people how much rent they've paid this month:

> “What was your total rental payment for this month for this unit? Include any extra charges for garage or parking facilities, but do not include direct payments by local, state or federal agencies.”

+/- a lot of stuff about weighting that I didn't follow.

https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...

Re: CPI for all items rises 0.4% in August, 2.9% YoY; shelter and food up

#55

Post by gdbsjjdn »

tlogan wrote: post #10
shoo wrote: post #7

I've heard a few economists interviewed about the estimated impact of tariffs, an argument is that tariffs should lead to higher prices for US consumers, but as a one-time price increase, not a sustained level of price inflation. That said, it's curious that this CPI news release highlighted "shelter" as a driver: > The index for shelter rose 0.4 percent in August and was the largest factor in the all items monthly i…

My naive expectation was: - Rents would go down because deportation of illegals will reduce demand - Prices of goods would skyrocket because of tariffs But instead, rents went way up. Could this be driven by the push to return to the office?

> Rents would go down because deportation of illegals will reduce demand

Genuinely curious because I've never heard someone state this quite so credulously. How many people do you think are in the country illegally, that they're moving the housing market in a substantial way? In my experience seasonal farm workers (both with status and without) are usually housed in what are essentially dorms. These buildings are borderline illegal from a building perspective and not housing supply you would compete for.

Who are the millions of undocumented people renting a 2000/month 2 bedroom 1 bath condo?

Re: CPI for all items rises 0.4% in August, 2.9% YoY; shelter and food up

#56

Post by cj »

altcognito wrote: post #25
cj wrote: post #8

What is the target rate? Was under the impression that 2-3% is the target. Less than that is bad. More than that, also bad.

2% was the target over the long haul (not 3%) -- BUT it is a dual mandate to keep unemployment to a minimum as well. This is considered on the high end of that part of the inflation mandate, and as another comment stated -- if it is persistent, it will be seen as a negative.

Compared to the past 12-24 months, 2.9% doesn't seem to be particularly worse than previous months. E.g. it was even higher at 3% at the beginning of the year and it has been at 2.7% for the past few months.

Might not be at the 2% target, but at least looking at the graph, 2.9% isn't making me panic. Maybe the panic is warranted, I don't know.

https://www.cnbc.com/2025/09/11/consumer-prices-rose-at-annu...

Edit: Although maybe it does get more worrying if the hypothesis is that reducing rates will result in upward pressure on inflation. That could be worrisome.

Re: CPI for all items rises 0.4% in August, 2.9% YoY; shelter and food up

#57

Post by bix6 »

baby-yoda wrote: post #38
bix6 wrote: post #2

100% odds the Fed cuts but inflation seems entrenched. Will the cut really help pull the labor market up? Tourism is down, AI is up, etc.

90% expected probability of a cut at the moment, down from 96% a week ago. A surprise no-cut would send a shock to the market IMO. https://www.cmegroup.com/markets/interest-rates/cme-fedwatch...

That’s 100% is it not? There’s 0% for current and then a split between the two potential cut amounts.

Re: CPI for all items rises 0.4% in August, 2.9% YoY; shelter and food up

#60

Post by thiago_fm »

FED is caught between a rock and a hard place, in a double bind.

Because of jobs data, it will 100% cut interest rates in the next 2-3 FED meetings with inflation clearly showing an upwards trend.

US could print money for over a decade because of China exporting deflation to it and the world, now that China is an enemy, it's up for a rude awakening.

Monetary policies matter, the Dollar will suffer great debasement (it already is).

Imagine how many dollars are in supply around the world, and now the world is quitting the dollar.

There'll be too many dollars for too little demand. Fasten your seatbelts...

The country will become industrialized for the wrong reasons -- by becoming poorer.

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