The Consumer Price Index (CPI), reported by the Bureau of Labor Statistics (BLS), rose in February. The CPI rose at a seasonally adjusted annual rate of 1.5% in February, the smallest increase since July 2016. Excluding the volatile food and energy components, “core” CPI increased at a seasonally adjusted annual rate of 2.5%, following the 3.8% increase in January.
The index for food and beverages rose at a seasonally adjusted annual rate of 2.7% in February, the largest rise since September 2015. The price index for a broad set of energy sources declined at a seasonally adjusted annual rate of 11.1%, after the 59.6% jump in January. The decline in energy prices partially offset the increases in other indexes, such as food, shelter and recreation.
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. In 2015, real rent inflation slowed down slightly, averaging 1.6%. In February of 2017, the real rent index rose at a seasonally adjusted annual rate of 1.0%, after the 0.5% decrease in January.