Today’s WSJ looks at that exact issue, and to Justin Lahart’s credit, avoids the trap:
"In other words, a hot housing market perversely depressed official inflation measures, and now a cooling housing market is pushing those measures up. Some bond investors are prepared to dismiss the statistical gymnastics. But Barclays economist Dean Maki says that would be a mistake. Price figures are simply getting back to normal after being unnaturally low for a long time, he says.
"It would be somewhat disingenuous for policymakers to strip out owners’ equivalent rent now, when they weren’t stripping it out before when it was keeping core inflation low," he says."
Disingenuous is certainly the right word for it, and kudos to Dean Maki for recognizing that.
Incidentally, the OER still understates inflation, as the chart at right reveals.
In related news, after the third consecutive weak monthly LEI, the Conference Board has announced yet another change to the leading indicators. The latest adjustment? Any item showing a negative number on a given month will be multiplied by "minus one" to change the coefficeint to a positive number. A spokesman announced that "this will help keep the LEIs as completely useless as possible."
AHEAD OF THE TAPE
WSJ, May 22, 2006; Page C1