With the May CPI report due tomorrow morning, let's revisit the two hot spots in the report.
Above is motor vehicle insurance. This has risen at a 20% year-over-year rate for five consecutive months (the actual data is represented by the blue bars).
Even if this auto insurance index were to flat-line from this point (i.e. zero month-to-month change in this insurance price index), it would still take seven months for the year-over-year measure to fall below double-digits (that scenario represented by the orange bars).
So, even if the insurance hikes are over, this year-over-year measure will continue to put upward pressure on the inflation data for months to come.
Next is the heavier weighted component that's been propping up CPI: Owners' Equivalent Rent (which is also influenced by the sharp rise in insurance rates).
This makes up 27% of the consumer price index. And you can see in this chart below, it has directly contributed at least 1.5 percentage points to the year-over-year change in CPI for 22 consecutive months. The streak will likely continue in tomorrow's report. The orange bars represent the path IF this component were to flat-line over the coming months (zero monthly change).
This too, will continue to put upward pressure on CPI for the months ahead.
What does it mean? The year-over-year computation of these two components is creating the illusion that inflation is "sticky" at higher levels.