I may be dating myself, but the CRB Index was once cited as a main snapshot to understand inflation. The main components of the index are:
Energy (17%) - consisting of crude oil, heating oil, and natural gas.
Grains (17%) - corn, soybeans, wheat
Industrials (17%) - copper and cotton
Livestock (12%) - live cattle and lean hogs
Precious metals (16%) - gold, platinum, silver
Softs (21%) - cocoa, coffee, orange juice, and sugar.
The above chart is tellin'? Yes?
Another interesting tidbit...the Bureau of Labor Statistics incorporates "owners equivalent rent" as a component of its Consumer Price Index (CPI). CPI does not take into account home prices, but measures rent. This "rental" figure is a whopping 30% of CPI. So, think about it, the stunning home price increase over the past decade was not captured in CPI, and as more folks sought to own homes, they did not demand rental units. Therefore, CPI did not have any pressure due to a stable rental market. Now we might have the opposite effect going forward, as home prices fall, and more homeowners (subprime, adjustable rate holders, etc etc) are forced out, they will seek to rent again. Also, those previously contemplating home ownership are frozen out of the market too, and therefore they stay put...aka = Renting. Therefore, we have additional demand coming into the rental property market, which could mean a significant pressure on CPI since it represents 30% of CPI. How might this impact the decisions from policy makers in the months ahead? Good luck.
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