Headline Inflation Surges on Gas Prices

The U.S. Bureau of Labor Statistics reported that the Consumer Price Index for all Urban Consumers, CPI-U, rose by 0.6% on a seasonally adjusted month-to-month basis in September 2012.  This follows a similar reading in August 2012. The monthly percent increase in CPI largely reflects increases in the prices for energy commodities. The gasoline price index rose by 7.0% on a seasonally adjusted basis, while fuel oil prices rose by 4.1%, but on a not seasonally adjusted basis. Outside of energy, the food price index remained muted, rising by only 0.1% in September. Year-over-year, the pace of “headline” inflation was 2.0%, up 0.3 percentage points from the previous month.

Despite the surge in “headline” CPI, “core” CPI, which excludes the more volatile food and energy prices, remained relatively benign. Data from the BLS reveal that “core” CPI rose by 0.1% on a monthly basis in September. Over the previous three months, the trend in the monthly “core” CPI has been flat.

The shelter index, which serves as an approximation for housing costs, continues to grow at a modest pace. For the second consecutive month the shelter index rose by 0.2% on a month-to-month basis. Over the past two years, the monthly change in the shelter index has ranged between 0.1% and 0.2%. The real rental price index, constructed by NAHB using the rental index and “headline” inflation, declined by 0.3% in September. However, the recent surge in “headline” inflation accounts for the latest decline in the real rental price index. Excluding energy and food prices, the real rental price index rose by 0.1% in September. Excluding the volatile food and energy components of CPI-U, growth in the real rental price index was flat since the middle of 2009, but has ticked up since the middle of last year.



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