Slower CPI Growth in October, But Real Rents Accelerate

The 16-month run of steady growth in the Consumer Price Index (CPI) months took a pause in October, registering only the second month-over-month decline since June of 2010. The October reading of the CPI for All Urban Consumers by the Bureau of Labor Statistics (BLS) revealed a 0.1% (SA) decrease. An easing in energy prices drove the decline in the all items index; meanwhile, the food and core indexes showed modest increases from the previous month. The 12-month change remains strongly positive, with the all items index up 3.5% (NSA) relative to October 2010. However, this represents a modest pullback from last month’s reported 3.9% increase.

 

The energy index fell 2.0% (SA) in October, driven by a 3.1% decrease in gasoline prices. The household energy index (-0.3%) also fell, with declines in the indexes for natural gas (-3.0%) and fuel oil (-0.5%) more than offsetting a rise in the electricity index (+0.4%). Despite easing in October, the energy index is 14.2% higher than it was in October 2010.

The rate of increase in the food index slowed in October, rising just 0.1% after increasing 0.4% in September. The deceleration was largely due to a decrease in the cost fruit and vegetables, with the price index for fresh fruits (-3.0%) and fresh vegetables (-2.4%) both declining sharply. Most other grocery items posted modest increases.

Core CPI, the index for all items less food and energy, increased by 0.1% in October — the same rate of increase as September. Gains in the shelter (+0.2%), medical care (+0.5%) and apparel indexes (+0.4%) were almost balanced by declines in the indexes for new vehicles (-0.3%), used cars and trucks (-0.6%) and recreation (-0.1%). With a string of twelve consecutive month-over-month increases, core CPI has gained 2.1% since October 2010.

The 0.2% advance in October is the 13th consecutive increase in the shelter index. Overall, the shelter index has climbed 1.8% on a year-over-year basis. The rate of growth of owners’ equivalent rent and rent of primary residence accelerated in October, up 0.2% and 0.4%, respectively, compared to 0.1% and 0.2% in September. In the past year, these subcomponents have risen 1.6% and 2.4%, respectively.

In real terms, the index of rent of primary residences advanced 0.5% in October — the 0.4% rate of increase in the index for rent on primary residences extended by the 0.1% decrease in the CPI for all items. The increase in October marks a departure from the relatively flat trend observed in the real rent index over the previous six months. Overall, the real rent index remains 1.2 points lower than it was in October 2010.



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