CPI Slipped in May

The Consumer Price Index (CPI), reported by the Bureau of Labor Statistics (BLS), slipped in May due to a decline in energy prices.

The CPI declined at a seasonally adjusted annual rate of 1.5% in May, following a 2.0% increase in April. Excluding the volatile food and energy components, “core” CPI increased at a seasonally adjusted annual rate of 0.8%, after the 0.9% increase in April.

The price index for a broad set of energy sources dropped at a seasonally adjusted annual rate of 28.2%, after the 14.6% increase in April. The sharp decline in energy prices contributed to the decline in overall prices. Besides energy prices, the indexes for apparel, communication, and medical care services declined too.

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 May of 2017, the real rent index rose at a seasonally adjusted annual rate of 3.5%, after the 2.8% increase in April.

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