What Does 9.1% Really Mean?

The CPI report is out and many speculate it as being the number of true inflation. But is it really? The report came in today at 9.1% inflation rate and well above what many expected.

We are starting to see some major back peddling in terms of people spending money. One of the biggest signs of this is homebuyers canceling on their deals

What exactly is the CPI report?

CPI stands for Consumer price index inflation and covers 8 major groups of consumer purchases. Those being...

• Housing
• Apparel
• Food and Beverages
• Transportation
• Education and communication
• Other goods and services
• Recreation
• Medical care
  
  *Image pulled from Investopedia: https://www.investopedia.com/terms/c/consumerpriceindex.asp

This number is pulled year to year and month over month. Meaning if the cost of these products goes up compared to last month that's the number we are shown. However the CPI report also takes into account other factors such as.

• New features - Getting more for your buck
• Alternatives - Instead of buying name brand you can buy generic
• Housing is based on Owner equivalent rent. This is done by a survey to people to tell them what they think they should be getting if they rent out their house.

All of these extra factors can skew these numbers and the real number could be very well HIGHER than the 9.1% being shown. This is showing us that inflation numbers are actully getting worse even though the fed has already kicked in a 75 point increase last time. This now puts into speculation that the FED will become even more aggressive and come the end of July we could see a rate hike as high as 100 points (which is 1%) a even more drastic and heavy rate hike then we have ever seen. Really this pushes the rate back to the level it should have been at during the lockdowns and we are now paying for that near zero or zero percent rate over those two years of lockdowns.

Fuel and Food prices

These prices are often consider highly volatile and thus excluded from the report as they are considered necessities. But let's take a look at those numbers anyways.

If we take a look at fuel costs we see a 7.5% increase and that's not year to year that's MONTH to MONTH! Gasoline was 11.2% increase in a single month. Now to be noted we have seen the price of gas come down from $5 a gallon here to about $4.40 which would negate that month over month increase.

What we are seeing though when we look at numbers so far in July is really a small increase in supply as well as people cutting back and gas prices falling. This should mean come August the report should come in much lower. Throw in another huge FED rate hike and you might see them fall drastically over the next 1-3 months.

That kind of looks to bring a opening for people to jump in on the housing markets at a much lower cost than before. This is currently what I'm going for as I start to ramp things up and look for a plot of land and builder myself in 2023. Till then I'll be building as quickly and as fast as possible as numbers like these are actully huge opportunities that one don't stick around and two don't happen often anymore.