CPI inflation, housing prices are the elephant in the room, the hippo in the pool

 I’ve often thought it would be fun to convene a therapy group of weather forecasters and economic forecasters. Both face the same frustration: Everybody wants a clear, simple answer they can’t possibly give, because they don’t know. Then they get blamed for being wrong anyway.

I’ve been trying to explain inflation in this way. Yes, inflation is high. Yes, inflation is falling. Yes, inflation will stay elevated. And yes, inflation could rise again. All these can be simultaneously correct, and I think they are. But that doesn't mean they all will happen.

Today I want to expand on this muddle-through inflation forecast. 

There’s a specific reason I think inflation will improve from where it was a year ago, but not drop back to pre-COVID levels (at least for a while). Inflation from here is all about housing (and to some extent services, but those prices can fall as fast as they rose). 

And, as you’ll see, the housing sector has changed a lot in the last few years.

When we talk about CPI inflation, housing prices are roughly one-third of the conversation. It’s not just one item on a list. Housing is the 800-pound gorilla, the elephant in the room, the hippo in the pool. 

It dominates everything else including food with 13.4% and energy at just under 7%.

 If housing prices are going one way, it’s very hard for total CPI to go the other way.

John Mauldin 23 June 2023

https://www.mauldineconomics.com/frontlinethoughts/a-funny-kind-of-recession