Energy Prices Continue to Push CPI Higher

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3% on a month-to-month basis during March 2012. Once again, energy prices boosted the topline reading on the month-to-month change in price levels, as the CPI for energy jumped 0.9%, after registering a 3.2% increase in February. Retail gasoline prices averaged $3.91 nationally (across all formulations) in March, surging 7.4% versus the previous month. In addition, this marks the third highest monthly reading (in current dollars) for gasoline on record. Prices at the pump have risen an additional 9 cents over the first two weeks of April and the U.S. Energy Information Administration anticipates prices rising further ahead of the Memorial Day holiday. While gasoline prices have exerted some upward pull on overall CPI, natural gas prices have offset this impact to some degree. In fact, the spot price for natural gas recently fell to its lowest point since October 2001 as inventories are seasonally abundant and demand remains weak.

Meanwhile, core CPI, which excludes food and energy goods, increased 0.2% from last month and gained 2.3% on a year-over-year basis. The largest gains were observed for used cars and apparel, but all major categories that make up core CPI experienced increases between February and March. The shelter index, which serves as the broadest measure of housing costs within the CPI, posted a 0.2% increase during March—the same rate of growth that occurred in the 5 prior months. On a year-over-year basis, the shelter index increased 2.1%. With the multifamily sector performing relatively well  compared to the single-family side of the market, rental rates will likely become an important issue as households make the calculus between owning and renting. NAHB’s measure of real rental rates, which is constructed from the CPI for rent of primary residences and overall CPI, fell for the third month in a row during March. While this result suggests apartment demand might be weakening, the recent slippage in the real rent index is likely a result of surging energy prices pushing overall CPI up faster rate than rents.

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