Reviewing June CPIs: Not a Happy Endeavor
But especially important now
“I got that summertime, summertime sadness” Lana del Rey
It may seem strange to express an emotion like melancholy around a macro variable like inflation, but that is what we feel as we look at the most recent data. We don’t see any good news in June’s real-time CPIs.1
Tentative signs of a turning point in some goods CPIs earlier this Spring—in general merchandise via the bullwhip dynamic we’ve written about in previous posts—have reversed, while the upward momentum in other sectors persists or has strengthened, notably in gasoline, autos, and services.
Our more technical time-series models of inflation show that the early Q2 deceleration in the daily headline CPI has bottomed and started to reverse, consistent with what we’re seeing in the disaggregated goods data.
A reckoning but also simple bad lack, this rat-a-tat succession of shocks hitting the global economy, difficult to anticipate beforehand, even harder to manage now. On to the data.
This post is the first of our series on June inflation trends, Part I focused on drivers of headline inflation while Part II takes a closer look at recent reversals in general merchandise pricing and the role of China’s Spring COVID shut-downs on supply dynamics—over the month and looking forward into the summer.
As of June 23rd, Dotdat’s real-time Headline CPI has increased 0.6 percent on a seasonally-adjusted basis over the month after rising 0.5 percent in May (compared to the 1.0 percent May print for the Headline CPI-U). This acceleration in the real-time CPI suggests that June’s official CPI-U print could be even higher than May’s startling 1.0 percent.
While our real-time CPI captures the dynamics and turning points of the headline index fairly well, its monthly run rate has averaged several tenths below the official prints (0.1 to 0.5 percentage points) over 2022.
We attribute its 0.5 percentage-point difference vs. May’s CPI-U to lower real-time Housing (0.2 percent) and Transportation (0.1 percent) inflation, as our Shelter CPI remained steady in May and into June while the BLS’s accelerated m/m, and our New and Used Vehicle CPIs accelerated but by less than in the official data. Food and Beverage inflation (not included in our headline CPI) accounts for the remaining difference (0.15 percent).
The Transportation sector is the most important of the eight sectors (in BLS-speak, ‘major groups’) that make up the headline CPI, generally accounting for 85 percent of the variation in the headline number.
Dotdat’s real-time Transportation CPI increased 2.3 percent on a seasonally-adjusted basis through June 23rd, after rising 1.6 percent in May (compared to the 2.0 percent May print for the Transportation CPI-U). A striking acceleration in the real-time Gasoline CPI accounts for the bulk of this increase.
Gasoline prices are up dramatically since the second week of May. Dotdat’s real-time Gasoline CPI is up almost 10 percent over June as illustrated by the grey line in the figure below. (The annualized figure is in the triple digits).
Used and New Vehicles
Dotdat’s real-time Used Vehicle CPI is also up so far in June by 0.5 percent on a seasonally-adjusted basis after rising 0.8 percent in May (and compared to the 1.8 percent rise in the Used Vehicle CPI-U). Our New Vehicle CPI shows a similar pattern, continuing its strength from May.
Dotdat’s real-time Airfares CPI has increased 4.0 percent on a seasonally-adjusted basis as of June 23rd after rising 14.2 percent in May (and compared to the 12.6 percent rise in the Airfares CPI-U). While it has come off the blistering pace of the past few months, we don’t see signs of a reversal as some industry sources have reported, e.g. Hopper’s Price Tracker shows domestic airfares down 5 percent (m/m percent change) as of June 27th.
Apparel and General Merchandise Preview
Finally, a quick preview of Part II on general merchandise with a peek at June’s real-time Apparel CPI—up 0.60 percent since the end of May and continuing to accelerate. Judging by pricing, the inventory issues that plagued major retailers in late Q1/early Q2 have largely resolved. The real-time data show general merchandise CPIs accelerating across the board, more on this in Part II.
It bears repeating that while we use the BLS’s item definition, weighting, and aggregation processes to build our real-time indexes, we don’t expect them to match the official CPI releases exactly. We expect our price indexes will exhibit the same dynamics as the official indexes over time — though observed at a much higher frequency.
As Claudia Sahm of Stay-at-Home Macro notes, tracking inflation is “not a happy endeavor but is especially important now”
Ready for more?