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Goodbye 50
While previewing this week's US inflation update, I wrote that if you’re in the camp hoping for an upsized rate cut from the Fed on September 18, "you really need a constructive read" on the shelter component.
Alas, the shelter gauge in the BLS report posted the largest MoM gain since January, a disconcerting 0.52% advance.
As the figure below shows, that's a meaningful uptick and it was, to quote the BLS, the "main factor" in driving a 0.2% increase on the all-items, headline index.
That
“At this point, I don’t care which side you take.”
Oh my, that is SO hurtful.
50 is gone. Too bad. Risk of a hard landing just went up. Real rates are roughly 3%. That’s too high. The fomc is looking in the rear view mirror. I hope we don’t get the orange felon back behind the resolute desk as a result.
Still 50/50 on 50
I don’t really understand (have theories) why the real-world slump in rents failed to show up in the CPI data, but I think it may be too late now. Apartment new rents are bottoming in the regions hardest-hit by new supply, and apartment renewal rents are rising at +MSD%. New supply has peaked and with starts low, new supply will decline for the next two years. As for rental houses, their supply never surged, new rents never went negative YOY and renewals are +MSD%. Market positive on rent growth prospects – see residential REIT charts.
If shelter inflation is 5% and everything else 2%, core PCE is 2.5%. Less room for error.
H-Man, agreed that 50 is in the rear view mirror for next week. The speed of the increases will be dictated by what happens in through the end of this years with the NFP number.