Falling Gas Prices Offset by Increasing Rents

In November, consumer prices were unchanged on a seasonally adjusted month-over-month basis according to data released by the Bureau of Labor Statistics (BLS). A month-over-month drop in the energy index was offset by increases in other components in the all items index. Over the past twelve months, prices on expenditures made by urban consumers increased 1.2% before seasonal adjustments.

The energy price index decreased for the second straight month, decreasing in November by 1.0% following a 1.7% month-over-month decrease in October. The gasoline index, a component of the energy price index, experienced another large month-over-month decrease at 1.6%. The index for natural gas also experienced a large decrease of 1.8% after dropping 1.0% month-over-month in October.

In November, Core CPI, which excludes more volatile food and energy prices, rose by 0.2% month-over-month. Over the past twelve months Core CPI increased by 1.7%.

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The shelter index rose 0.3% month-over-month in November after increasing 0.1% month-over-month in October.  Over the past twelve months, the shelter index increased 2.4% before seasonal adjustments.

Because shelter costs represent a large share of the average consumer’s expenditures, a 0.3% month-over-month increase is worth exploring further. Although the increase in the shelter index partly reflects increases in rental prices, the BLS measure does not isolate the change in rental prices from the changes in the overall price index. NAHB constructs a real rent price index to isolate the change in rental prices. The NAHB constructed 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. The real rent index has increased for ten consecutive months and by 1.0% over the past year.

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