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  • ‘Super users’ received note before BLS tried to retract
  • Jump in rent gauge spurred higher-than-expected inflation

The US Labor Department’s statistical agency emailed a group of analysts about a key factor behind the jump in January’s consumer price index before trying to take it back, raising questions about the validity of the figures.

A Tuesday email to data “super users,” seen by Bloomberg, suggested a surge in a measure of rental inflation — which had left analysts puzzled — was due to a shift in underlying calculations, rather than just a rise in prices. One recipient said the Bureau of Labor Statistics tried to retract it and told them to disregard its contents.

If the explanation proves correct, the new information would mean readings on rents could stay elevated through the first half of the year, according to Ian Shepherdson, chief economist at Pantheon Macroeconomics.

The BLS is “currently looking into this data, and we may have additional communication regarding the rent and OER data soon,” an economist at the agency told Bloomberg in an emailed statement Wednesday. A spokesperson for the Labor Department referred inquiries to the BLS, whose official press contacts didn’t respond to messages seeking comment.

The pop in the measure, owners’ equivalent rent — the largest individual component in CPI — was a major factor behind the strength of the overall January CPI figure published on Feb. 13. The higher-than-expected CPI numbers have been cited by Federal Reserve officials as a reason to delay widely anticipated interest-rate cuts.

Text of BLS email:

Super Users,

Good afternoon.

The weights for single family detached homes increased materially from December 2023 to January 2024. All of you searching for the source of the divergence have found it.

No additional information related to this question will be disseminated. We do not do diagnostic analysis of microdata.

At issue is how much weight single-family detached homes are given versus multifamily units within the calculation. OER rose in January by the most since April 2023, marking a sharp reversal from a trend of moderation in recent months.

An increase in the weighting of single-family homes within the OER measure relative to multifamily units would tend to give it a temporary boost because the supply of single-family homes has been restrained, keeping prices elevated, whereas multifamily supply has surged in recent years.

The acceleration in OER puzzled analysts because the rate of increase in a similar, though smaller, CPI component known as rent of primary residence continued to decelerate in January. The two typically move up and down together, and some suggested the larger OER move should be seen as a fluke.

But if the weighting explanation proves right, it could keep OER inflation readings elevated for the next several months, Shepherdson said in a note to clients.

“Prudence suggests” that “we should expect OER to rise at the January pace for the next five months, at which point it should revert to the rate of increase of primary rent,” he said.

Written by:  — With assistance from Reade Pickert, Christopher Condon, and Vince Golle @Bloomberg