Rising rents in the U.S. and prolonged out of control prices; exclusion of Korea's own housing costs
As inflation price controls in the U.S. are prolonged and housing rents are on the rise, Korea's economic outlook is becoming more difficult as housing costs are excluded from the consumer price index.
The overall consumer price index in the United States rose 3.1% from a year ago, down from 3.4% in December, 0.2%p higher than the 2.9% expected by economists, and core prices rose 3.9%, showing a typical example of service inflation.
The Ministry of Labor's Bureau of Labor Statistics announced the Consumer Price Index (CPI), and Reuters reported under the title <Rent Rising Increases U.S. Inflation>, "Housing costs, including rent, rose 0.3% in January following a 0.2% increase in December last year, leading to the increase in CPI." “It took up more than two-thirds,” he said on the 13th.
The U.S. CPI rose 3.4% in the December index over the 12 months through January of last year, and rose 3.1% in January on an annual basis.
Economists surveyed by Reuters expected CPI to rise 0.2% month-on-month and 2.9% year-on-year, with the gap widening at a 3.1% rise.
The US CPI is ‘food away from home’ +0.5, ‘fruits and vegetables’ +0.4, ‘all items except food energy’
Out of the +0.4 increase, ‘primary residence rent’ rose by +0.4, and American experts predicted a ‘continued’ increase in residential rent.
In Korea, due to the surge in ‘fruits and vegetables’, ‘primary residence rent’ is completely excluded from the CPI and is not reflected in the price index.
According to the Bank of Korea, the balance of bank household loans in January was 1,098.4 trillion won, an increase of 3.4 trillion won compared to the previous month.
The government and securities companies attempted to boost the stock market by promoting expectations of interest rate cuts, but in January, credit loans and other loans decreased by KRW 1.5 trillion and home mortgage loans increased by KRW 4.9 trillion (compared to the previous month).
The main reason for the 'reason for caution' regarding the Labor Department's inflation report in January was the New York Times, which said, "The measure that estimates the cost of renting a home owned by someone (owner's equivalent rent) has risen." The likelihood of a rate cut being imminent has sharply decreased, stocks are falling and central banks are unlikely to cut interest rates at their next meeting in March.”
The NYT continued to report on the 13th, “The Federal Reserve has significantly lowered the possibility of an interest rate cut at the May meeting,” and “The stock market closed down 1.4% as traders revised their outlook on the Federal Reserve’s actions.”
The housing market accounts for a large portion of U.S. spending, so the cost of owning a home significantly contributes to the economic slowdown and overall inflation control.
Economists are currently focusing on housing rents in particular in their monitoring of service prices to gauge whether inflation is falling to sustainable levels.
The U.S. price index has seen slower increases in rents in recent months, with many analysts predicting a 2.9% rise in January's index as many analysts assumed cheaper new rentals would be reflected in the official inflation figures, but the actual rise was 3.1%. I raised it.
In Korea, this trend of rising own housing costs is excluded from price statistics, and the main focus is on government and securities company reports betting on an early interest rate cut in the United States.
The Fed's report on the 13th showed that the core inflation index rose 3.9%, led by the services industry, with prices for airfare, hotel rooms, haircuts and financial aid all rising in January.
The seasonally adjusted U.S. Consumer Price Index (CPI) was led by Plumbing Utilities Gas Services and Hospital Services in 16 of 24 categories from December to January, followed by Fuel Oil and Used Cars and Trucks, up 4.5% and 3.4%, respectively. % respectively fell.
The NYT predicted that “service inflation tends to be driven by slow movements such as wage growth and can be very stubborn,” and that “interest rates will likely be cut before inflation completely subsides.”
Regarding the risk of an interest rate cut, the NYT pointed out, “A sharp rise in prices from an interest rate cut before inflation has completely calmed down could become a more permanent feature of the U.S. economy.”
In the United States, January indicators show that employment has increased, wage growth remains solid, and consumer spending continues.
The NYT said, “Some analysts say that tackling inflation in such a hot economy will be more difficult than the progress made so far,” and that “the last mile is the most difficult time” in inflation.
“It is too early to declare victory over inflation,” said Torsten Slok, chief economist at Apollo Global Management. “The last mile will be more difficult because it is evidence of the potential risks that could arise if we withdraw,” he told the NYT.