The US Bureau of Labor Statistics has been under some fire for quirks in the January consumer price index report, particularly the shelter component and how some unusual changes boosted it.
Officials there today held a lunchtime presentation on the report and the rent and owners’ equivalent rent components in particular. This slide gets to the heart of the matter.
US inflation less shelter is running at 1.5% y/y, under the Fed's target.
In the January report, there was a huge divergence between rent and owners’ equivalent rent.
The BLS highlighted why the measures might diverge.
There's also the case of the mysterious email that went out last week that was later withdrawn. It said:
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
The divergence appeared to come from OER unit-level weights.
That skew appeared to come from single-family detached units which were re-benchmarked to a 50% weighing from the low 40s this year and 35% the year before.
The big question is whether the skew will persist into February and beyond. There wasn't really any clarity there with officials highlighting how important sampling will be and how difficult it is to find renters in high-income single-family home areas.
This is all pretty deep into the weeds for me but Parker Ross does an admirable job trying to sort it out.
