For reasons that are entirely understandable, tomorrow’s retail sales report is attracting a lot more attention than Friday’s report on consumer prices as the latter is seen as almost irrelevant these days after steady dis-inflation over the last 18 months or so. The chart below from this item at macroblog shows why – it’s exceedingly difficult to get excited about inflation just under two percent.
This chart came along with a discussion about owners’ equivalent rent, a subject that has been dear to my heart for years since first penning “How Owners’ Equivalent Rent Duped the Fed” (a piece that still ranks second only to a Labor Department description of such in this Google search).
It should be interesting to see if and how much rising home prices affected inflation’s housing component last month, but the more important story will be the smaller light blue area to the right of housing that will likely rise above the red dashed line after energy prices surged earlier in the year.