Thursday, March 17, 2016

February 2016 CPI

Well, shelter inflation continues to push up, and to inflate the Core CPI measure.  But, I must say, the non-shelter core is certainly rising healthily.

Core minus shelter inflation is still under 2%, year over year, and acceleration will probably level off over the next few months, since the next few months due to fall out of the year-over-year measure were generally high.  That should give the Fed some cover.  Let's hope they use it.

Mortgage levels keep teasing at growth, but mortgage growth remains pretty anemic.  Manufactured homes have recently shown some signs of growth.

Some mixed signals here.  It would be nice to see a tick up in mortgage growth and housing starts and a tick up in real GDP.

Calculated Risk noted that housing starts were high in February, but permits were more subdued, and industrial production continues to look sluggish.


  1. It is interesting to note that automobile prices have not budged in 20 years. Nominally!

    Manufactured homes have budged up a bit, but I suspect with volume and fresh capital, prices could mimic the auto sector. Cars are a lot more complicated than trailers.

    Not sure trailers can be feasibly imported. Maybe too bulky. Perhaps clever importers would design a knockdown trailer for shipment.

    The hold-up is that voters have become used to property zoning, and the right to tell other people how to develop their land, including no right to pull a trailer onto your own lot and live in it.

    Everyone is a pinko-greenie in their own 'hood.

  2. Kevin--

    Okay, I just had a brainstorm, and don't laugh this one out of the park. Hear me out.

    1. "The constitutionality of zoning ordinances was upheld in 1926. The zoning ordinance of Euclid, Ohio was challenged in court by a local land owner on the basis that restricting use of property violated the Fourteenth Amendment to the United States Constitution. Although initially ruled unconstitutional by lower courts, ultimately the zoning ordinance was upheld by the U.S. Supreme Court in Village of Euclid, Ohio v. Ambler Realty Co. By the late 1920s most of the nation had developed a set of zoning regulations."--Wikipedia

    2. Okay, so before the late 1920s, property owners could buy land and develop as they saw fit, and banks would lend accordingly. Remember, bank lending is the transmission belt for new money into an economy.

    3. By the late 1920s, increasing numbers of cities start zoning--and even "retroactive" zoning is legal. You can buy property and have downzoned after you buy it. Buyers and banks know this. This makes buying property riskier and development slower and harder.

    4. Okay, Smoot-Hawley is routinely cited as a contributing factor to the Great Depression. I have always pondered this, as free trade was such a small part of the national economy then. Nevertheless, economists routinely identify Smoot-Hawley as a factor in the Great Depression.

    4. To my knowledge, no one has ever even considered the 1926 Supreme Court property zoning decision as an instigating or contributing factor to the Great Depression, even though property lending one of the main channels for new money into the economy.

    5. No doubt, bad monetary policy aggravated the Great Depression, as Scott Sumner has argued. Also, bad labor laws contributed as Sumner has also argued.

    But as always, property zoning is invisible to modern-day economists.

    Read the econ blogs. There are routine mentions of immigration, free trade, the minimum wage, federal deficits. Oil prices minutely scrutinized.

    Property zoning? Not on the radar---now, or when anybody researches the Great Depression.

    Might be worth a chapter in your book. You may end up greatly adding to the understanding of the Great Depression. Maybe you will re-write the history. I wonder if there are national figures on property lending staring in the last 1920s.

    1. Interesting point. Except many economists say investors will buy up the excess properties anyway, and prices will not significantly decline even with more housing stock.

  3. Neither here nor there but fascinating;

    1. Wow. What a find Benjamin. The parallels are certainly compelling. I think this is too much to fit into the book in detail. It would take a lot of work, just because of the difficulty of finding data, but it's definitely an interesting issue.

      Warren Buffett has a saying, "Only when the tide goes out do you discover who's been swimming naked."
      When I read things like the abstract in your link, I wonder how much hindsight bias causes everyone, including academics, to blame skinny dippers for the tide. Was the collapse in rental income in the 1930s a result of overbuilding and overpromising, or a result monetary contraction?
      Before I started digging into the current crisis, I would have been more apt to blame the previous excess, I think. Now, I'm not so sure.

      Here's residential fixed investment back to 1929. Too bad it doesn't go back a few more years.