CPI Core Sans Shelter Rising at 0.6% Annually

There are many who labor in relative obscurity in econo-land, much to the loss of macroeconomics.

Kevin Erdmann, author of the blog The Idiosyncratic Whisk, has consistently produced the most insightful commentary on housing and finance on the web, and probably anywhere for that matter.

One of Erdmann’s monthly  “chores” is to produce the CPI core sans shelter index.

The CPI core minus shelter costs rose at a 0.6% annual rate in the last six months, reports Erdmann.

The chart shows the year-on-year core CPI less shelter.

If the US has an inflation problem, obviously housing is playing a major role. Outside of housing, inflation is very subdued.


The US macroeconomic profession has ossified into a 1970s-style awareness of inflation—that is, labor-centric.

“Labor markets continued to be characterized as tight throughout the country, with most Districts reporting widespread shortages,” reports the US Federal Reserve, in the lead intro to the Beige Book released Sept. 12.

“Widespread shortages”!

My friends, I am here to tell you, that based on Fed reports, the price signal has failed us.

As chronicled in these pages, every Beige Book since at least Jan. 2016 has prominently featured  “labor shortages.”  The Fed contends the current 3.9% unemployment rate is unsustainably low.

To be fair, for the first time in Beige Book history (that I can find) the Fed actually acknowledged housing shortages—but only in the section on the 12th San Francisco District (famed for the zoning-induced and acute housing-shortages of Seattle, Portland, and California) “Contacts across the District noted that the low levels of inventory in tandem with brisk demand for housing resulted in continued upward pressures on home prices and rents.”

Well, a small step in the right direction. However, enough to alter the national debate on inflation?  Probably not.

A change in Fed policies? Very doubtful.

Investor beware.


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