Core inflation dropped while headline inflation increased in the Bureau of Labor Statistics’ (BLS) Consumer Price Index (CPI) for September.
The CPI rose at a seasonally adjusted annual rate of 3.6%, following a 2.5% increase in August. Excluding the volatile food and energy components, “core” CPI rose at a seasonally adjusted annual rate of 1.4%, slower than the 3.2% increase in August. The price index for a broad set of energy sources increased at an annual rate of 41.5%, after a 17.4% decline in July and essentially no change in August.
Core inflation slowed due to the sharp declines in the prices of apparel and education and communication services. The jump in energy prices accounted for most of the increase in headline inflation.
NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than overall inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster (slower) than overall inflation, the real rent index rises (declines). The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components).
After declines during the recession, inflation in real rents accelerated from 2012 to 2014, a period of strong recovery in the multifamily sector, reaching a peak average annual rate of 1.7% in 2014. Real rent inflation has hovered in a very narrow range in 2015 and 2016.