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“We are surprised by the softness of the core. Some of the components where we expected solid increases did deliver; owners’ equivalent rent, for example, rose 0.27%, the biggest increase since January last year and a further clear sign that the downward pressure on rents – 40% of the core – is fading. Physicians’ services prices jumped 2.0% month-to-month, completing the adjustment implied by the 3.75% increase in Medicare reimbursement rates, effective January 1. But airline fares plunged 5.1%, despite soaring jet fuel prices, and hotel room rates dropped 2.3%, in contrast to the increase in room rates reported by STR, Inc., which tracks key hotel performance metrics. These declines can’t last. Finally, used auto prices fell by 0.9%, the fourth-straight big decline, widening the gap between the CPI measure and auction prices still further. Again, this does not seem sustainable.”
Ian Sheperdson, chief U.S. economist at Pantheon
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