US Labor Department Sows Confusion With Email on Consumer Prices BLS emailed ‘super users’ on CPI data, then tried to retract
A Tuesday email to a group of data “super users,” seen by Bloomberg, suggested a surge in a measure of rental inflation — which left analysts puzzled — was caused by an adjustment to how subcomponents of the index are weighted. One recipient said the Bureau of Labor Statistics tried to retract it and that they were told to disregard its contents.
The pop in owners’ equivalent rent was a major factor behind the strength of the overall January CPI figure — which was published on Feb. 13 — given its outsize weight in the index. The higher-than-expected CPI numbers have been cited by Federal Reserve officials as a reason to delay widely anticipated interest-rate cuts.
Read the BLS email:
Super Users,
Good afternoon.
The weights for single family detached homes increased materially from December 2023 to January 2024. All of you searching for the source of the divergence have found it.
No additional information related to this question will be disseminated. We do not do diagnostic analysis of microdata.
The information has implications for the path of inflation in the near term because the adjusted weights could keep readings on rents elevated through the first half of the year, according to Ian Shepherdson, chief economist at Pantheon Macroeconomics.
At issue is the relative weighting of single-family detached homes versus multifamily units in OER, the largest individual component of the CPI. It rose in January by the most since April 2023, marking a sharp reversal from a trend of moderation in recent months.
The BLS is “currently looking into this data, and we may have additional communication regarding the rent and OER data soon,” an economist at the agency told Bloomberg in an emailed statement.
A spokesperson for the Department of Labor declined to comment, referring all inquiries on the topic to BLS. Those press contacts didn’t respond to messages seeking comment.
An increase in the weighting of single-family homes within the OER measure relative to multifamily units would tend to give it a temporary boost because supply of single-family homes has been restrained, keeping prices elevated, whereas multifamily supply has surged in recent years.
The acceleration in OER puzzled analysts because the rate of increase in a similar, though smaller, CPI component known as rent of primary residence continued to decelerate in January. The two typically move up and down together, and some suggested the larger OER move should be seen as a fluke. (…)
FYI, all my analysis and charts only use CPI-Rent, not OER. CPI-Rent has been slowing from the 0.50-0.55% monthly range to 0.43% in December and 0.34% in January, still above 4% inflation like Zillow-Rent.
BTW, Tricon Residential yesterday reported that same-home rent growth was +6.0% in Q4, driven by +3.7% growth
on new leases and +6.6% on renewals.
VALUATION WATCH
Equity Risk Premia:
Ed Yardeni has this close up:
The 13-34w EMA trend is extended, but still rising.
The S&P 500 IT sector: since the 13-34w EMA signal in early March 2023, +60%:
The more it grows, the more it grows:
From 20x to 28x. The 2000 peak was at 40x!
