PodcastThe Real Investment ShowOliver Rust

9-7-26 Is Inflation Data Getting It Wrong? - Oliver Rust Interview

Rust argues that official CPI may lag consumers' lived experience because it undercaptures substitution, regional variation, housing costs, and quality changes; Truflation's roughly 80 data sources and more than 15 million daily items illustrate a broader approach. He also points to mortgage lock-in, elevated input costs, labor-force changes, and resilient consumer income as forces shaping inflation and housing affordability. Looking ahead, he sees housing inflation potentially returning after a sharp rate decline, while travel prices may remain supported by strong demand and a possible recovery in business travel.

InflationConsumer SpendingReal Estate

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Key Takeaways

Rust says a Middle East conflict could raise gas, oil, jet-fuel, logistics, and transportation costs, while import adjustments on Canadian manufactured goods could reach 50% and solar-panel imports from China could add further pressure. These risks would compound already elevated producer and import prices, making further disinflation more difficult.

Rust argues that official CPI may diverge from consumers' actual inflation because it does not fully capture product substitution, regional price differences, housing-cost changes, or the perceived value of quality adjustments. He points to Truflation's roughly 80 data sources and more than 15 million items tracked daily as an example of how broader, more real-time data could improve measurement and policy decisions.

Housing affordability is being shaped by both measurement limitations and market constraints: BLS models owner-occupied housing costs through rents rather than actual mortgage payments, while homeowners with loans near 3% are reluctant to move into mortgages around 6.5%. Combined with weak new-home construction, this mortgage lock-in limits supply and demand and leaves lower- and middle-income households under greater affordability pressure.

GEO-POLITICS

Middle East Energy — Rust says a Middle East conflict could affect gas prices, oil reserves, logistics, jet fuel, and transportation, creating broader inflationary pressure.

“One of course is the conflict in the Middle East. What what does that do with gas prices?…”—

ECONOMY

Modernizing CPI — Rust argues that government CPI is not sufficiently real-time or aligned with consumers' price experiences. Truflation uses roughly 80 data sources and tracks more than 15 million items daily; Rust says broader datasets could improve inflation measurement and policy decisions.

“you know, when you created two fla trueflation, what did you believe was fundamentally wrong with the way that we were already measuring inflation?…”—

Consumer Substitution — Rust argues that CPI may not fully capture consumers switching to cheaper or different products, such as replacing branded soda with private-label goods or steak with less expensive meat.

“And my issue with that was, well, what happens if a consumer decides to buy an alternative product?…”—

Regional CPI Differences — Rust says national CPI can obscure geographic differences in household inflation because sampling points have declined. Costs such as gasoline and housing also vary substantially across states.

“One of course is the main Consumer Price Index which is from the Bureau of Labor and Statistics…”—

FORECASTS

Housing Inflation Rebound — Rust says housing has been a disinflationary factor for about three years, but a dramatic decline in interest rates could make it inflationary again. He expects housing activity to increase above roughly 5%, jump more sharply around 4.2% to 4.3%, and stabilize below 4%.

“but again of course the key concern is how does that progress going forward and it housing as a long-term trend of the last I don't know 3 years has…”—

INTRO

Lance Roberts introduces Oliver Rust and frames Truflation as a real-time alternative to CPI for capturing consumers’ actual inflation experiences.

What is Wrong with current Inflation/CPI Measurement?

Rust identifies CPI’s slow updates and disconnect from lived prices as its central weaknesses, especially because consumers change what they buy when prices rise.

The Data Truflation Uses

Truflation combines roughly 80 daily or weekly data sources and tracks more than 15 million goods and services rather than repeatedly sampling a narrow item set.

Solving for Interstate Price Variables

The index aggregates commercially available datasets, applies its own methodology and weights, and publishes a composite inflation measure.

How is Housing Weighted in Truflation Metric vs BLS & CPI

Truflation uses census-level grocery and fuel data to capture interstate price differences, including variations caused by taxes and regional markets.

The Concessions in Rental Agreements are not accounted for

Rust says Truflation can provide state-level housing, gasoline, and grocery information, offering more geographic detail than CPI’s shrinking sample.

What is Inflation Doing Now?

Housing receives a smaller effective weight in Truflation because it measures mortgage costs and actual housing finance conditions rather than relying primarily on imputed owner-equivalent rent.

The Bifurcation in Housing - New Homes vs Existing Home Sales

Truflation incorporates mortgage rates, down payments, and aggregated state-level lending data to reflect how housing costs affect different households.

Housing Affordability & K-Shaped Economy

Rental websites often show flat or falling asking rents while CPI remains elevated because the measures capture different segments and timing.

Who's Right: CPI or Truflation? (Working with the Fed)

Rust says BLS misses rental concessions and new-rental data can differ sharply from renewal prices, both of which Truflation attempts to model.

The Boskin Commission & Hedonics - What Truflation Does Not Measure

Housing inflation had eased through concessions and temporary inventory, but supply has tightened and the category is beginning to stabilize or turn upward.

Factoring in Substitution by Consumers

Mortgage lock-in, limited inventory, and high rates are suppressing mobility, while a sharp rate decline could make housing inflationary again.

Effects of FIFA World Cup in U.S.

The housing market is bifurcated between new and existing homes, with existing owners reluctant to move and future rate reductions potentially releasing pent-up demand.

Truflation Expectations for the Future

Affordability pressures fall hardest on younger and middle-income households, while wealthier consumers remain relatively insulated in a K-shaped economy.

The Resilience of the Consumer - how long will they spend?

Rust and Truflation are working with the Federal Reserve and regional Feds on modernizing inflation measurement and improving underlying data inputs.

What if Truflation Had Been Around Back Then...

Rust explains that Truflation does not apply traditional hedonic adjustments, instead reporting the prices consumers actually pay for changing products and services.

Truflation Plans for Expansion: Employment & Economic Indicators

The index captures substitution through broad transaction data, while the World Cup temporarily lifted travel, hotel, airline, and entertainment prices in host markets.

Cross Correlation of data sets is worth reviewing

Rust expects inflation to remain above two percent as services wages, labor-force changes, tariffs, consumer resilience, and possible business-travel recovery keep price pressures elevated.

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Important Disclaimers

Not Investment Advice: For education only — not financial, tax or legal advice.

AI-Generated: Made by AI from source transcripts and may contain errors.

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