Urban consumers experienced a slightly higher overall price increase in May. According to the Bureau of Labor Statistics, (BLS), the Consumer Price Index – Urban Consumer (CPI) rose by 0.1% on a seasonally adjusted month-to-month basis. Over the past twelve months, CPI has risen by 1.4% on a not seasonally adjusted basis. Energy prices, which often contribute to the monthly volatility in headline CPI, rose by 0.4% as gasoline prices were flat over the month. Meanwhile, food prices fell over the month by 0.1%. Over the past year, energy prices declined by 1.0% while food prices rose by 1.4%. “Core” CPI, which excludes the more volatile food and energy prices, rose by 0.2% over the month. Over the past twelve months, “core” CPI rose by 1.7% on a not seasonally adjusted basis.
The increase in consumer prices over the month of May largely reflected an increase in shelter costs. As Chart 1 illustrates below, shelter costs account for 32% of headline CPI or about one-third of the average urban consumer’s expenditures. Over the month of May, shelter costs rose by 0.3%. The 0.3% increase in a sizeable expenditure category such as shelter will have a larger affect on the total change in consumer expenditures as measured by headline CPI than the 0.4% monthly increase in energy prices, which represents 10% of expenditures, or the 0.4% month-to-month increase in transportation services, which accounts for 6% of consumer expenditures.
The increase in shelter prices partly reflects rising rental prices. In May, rental prices rose by 0.3%. However, this measure does not isolate the change in rental prices from the changes in the overall price index. To accomplish this, NAHB constructs a real rent price index by deflating the price index for rent by the index measuring core inflation. This measure indicates whether inflation in rents is faster or slower than general inflation and provides some insight into the supply and demand conditions for rental housing, after controlling for overall inflation. When rents are rising faster (or slower) than general inflation the real rent index rises (declines). As Chart 2 illustrates, the real rent index has increased for four consecutive months and 10 of the last 11 months. In May, the real rent index rose by 0.1%. Over the past year, the real rental prices have risen by 1.1%