Natural Gas Prices Increase Sharply in March

April 15, 2014

Over the past 12 months, according to data released by the Bureau of Labor Statistics (BLS), prices on expenditures made by urban consumers increased 1.5% before seasonal adjustments. Consumer prices increased in March by 0.2% on a seasonally adjusted month-over-month basis.

Two important components of the residential utility bill (natural gas and electricity) increased in March. The natural gas index, a component of the energy price index, increased sharply month-over-month by 7.5%. This was the largest month-over-month increase since October 2005. Over the past twelve months the natural gas index increased by 16.4%. The electricity index increased month-over-month by 1.1% and 5.3% over the past twelve months.

The energy index fell for the second consecutive month by 0.1% on a month-over-month seasonally adjusted basis. The increases in natural gas and electricity were offset by a decrease in gasoline and fuel oil; all components of the energy index.

For the second consecutive month, the food index rose by 0.4%. Over the past twelve months, the food index increased by 1.7%. The index for meats, poultry, fish, and eggs increased 5.1% over the past twelve months.

The core CPI rose by 0.2% on a seasonally adjusted month-over-month basis and 1.7% for the year before seasonal adjustments. The Core CPI excludes more volatile food and energy prices.

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The shelter index rose 0.3% month-over-month in March after increasing 0.2% in February.  Over the past twelve months, the shelter index increased 2.7% 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 increased in March by 0.1% month-over-month and 1.2% for the year.

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Consumer Prices Edge Up

March 19, 2014

According to data released by the Bureau of Labor Statistics (BLS), prices on expenditures made by urban consumers increased 1.1% before seasonal adjustments over the past twelve months. Consumer prices increased in February by 0.1% on a seasonally adjusted month-over-month basis.

The Core CPI, which excludes more volatile food and energy prices, rose by 0.1% month-over-month. Over the past twelve months Core CPI increased by 1.6%.

Chart_1

The food index rose sharply by 0.4% month-over-month, its largest increase since 2011. Over the past twelve months the food index increased by 1.4%. The index for meats, poultry, fish, and eggs, a component of the food index, experienced the largest month-over-month increase of 1.2% on a seasonally adjusted basis. Over the past twelve months the index for meats, poultry, fish, and eggs increased by 4.0%.

The energy index fell 0.5% on a month-over-month seasonally adjusted basis after two consecutive months of increases. The month-over-month decline in the energy index was driven by a 1.7% decrease in the gasoline index. Over the past twelve months the gasoline index decreased by 8.1%.

The natural gas index, a component of the energy price index, experienced the second consecutive month-over-month increase of 3.6% on a seasonally adjusted basis. Over the past twelve months the natural gas index increased by 8.3%.

The shelter index rose 0.2% month-over-month in February after increasing 0.3% month-over-month in January.  Over the past twelve months, the shelter index increased 2.6% before seasonal adjustments.

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 price index by deflating the price index for rent by the index for overall inflation. This measure indicates whether inflation in rents is faster or slower than general inflation and provides insight into the supply and demand conditions for rental housing, after controlling for overall inflation. When rents are rising faster (slower) than general inflation the real rent index rises (declines).

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The real rent index has increased for thirteen consecutive months. The real rent index increased in February by 0.1% month-over-month and 1.2% over the past year.


Natural Gas and Electricity Prices Increase Sharply in January

February 20, 2014

According to data released by the Bureau of Labor Statistics (BLS), consumer prices increased in January slightly by 0.1% on a seasonally adjusted month-over-month basis. Over the past twelve months, prices on expenditures made by urban consumers increased 1.6% before seasonal adjustments.

The month-over-month increase in the all items index was driven by a 0.6% increase in the energy price index. The natural gas index, a component of the energy price index, experienced the largest month-over-month increase of 3.6% on a seasonally adjusted basis. The electricity index also experienced a large increase of 1.8% on a seasonally adjusted month-over-month basis. Over the past twelve months, the natural gas index increased 4.9% and electricity index increased 4.4% before seasonal adjustments.

Utilities bills (natural gas and electric) are an important part of residential expenditures. A large increase in prices during an especially cold winter can impede expenditures on other goods. Of course, consumption expenditures on utility bills vary by state and the age of the housing stock. In general, older homes are less energy efficient than new construction.

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The Core CPI, which excludes more volatile food and energy prices, rose by 0.1% month-over-month. Over the past twelve months Core CPI increased by 1.6%.

The shelter index rose 0.3% month-over-month in January after increasing 0.2% month-over-month in December.  Over the past twelve months, the shelter index increased 2.6% before seasonal adjustments.

Because shelter costs represent a large share of the average consumer’s expenditure’s, 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.

Chart_2

The real rent index has increased for twelve consecutive months. The real rent index increased in January by 0.1% month-over-month and 1.2% over the past year.


Real Rents Continue to Rise

January 16, 2014

In December, consumer prices increased by 0.3% on a seasonally adjusted month-over-month basis according to data released by the Bureau of Labor Statistics (BLS). Over the past twelve months, prices on expenditures made by urban consumers increased 1.5% before seasonal adjustments. Month-over-month increases in the shelter and energy were major drivers.

The energy price index increased by 2.1% month-over-month after two months of decline. The gasoline index, a component of the energy price index, experienced a large month-over-month increase of 3.1%. The index for natural gas saw a decrease for the third straight month, dropping 0.4%.

The Core CPI, which excludes more volatile food and energy prices, rose by 0.1% month-over-month. Over the past twelve months Core CPI increased by 1.7%.

Chart_1

Shelter costs represent a large share of the average consumer’s expenditures. The shelter index rose 0.2% month-over-month in December after increasing 0.3% month-over-month in November. Over the past twelve months, the shelter index increased 2.5% before seasonal adjustments.

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 price index by deflating the price index for rent by the index for overall inflation. This measure indicates whether inflation in rents is faster or slower than general inflation and provides insight into the supply and demand conditions for rental housing, after controlling for overall inflation. When rents are rising faster (slower) than general inflation the real rent index rises (declines).

The real rent index has increased for eleven consecutive months. For the December data, the real rent index increased by 0.2% month-over-month and 1.1% over the past year.

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Real Rents Up 1.2% Over Last Year

October 30, 2013

In September, consumer prices rose by 0.2% on a seasonally adjusted month-over-month basis according to data released by the Bureau of Labor Statistics (BLS). Over the past twelve months, prices on expenditures made by urban consumers increased 1.2% before seasonal adjustments.

Data collection for the estimates occurred prior to the government shutdown; however the release of data was delayed by two weeks. Next month’s release has also been pushed back five days, with the original schedule back on track starting in December.

The September release shows a slight increase from last month. In August, the Consumer Price Index – Urban Consumer (CPI) increased by 0.1% month-over-month.

The energy price index accounted for about half of the month-over-month increase for all items. The index increased by 0.8% month-over-month in September after decreasing 0.3% in August. All components of the energy price index rose in September with the index for natural gas experiencing the largest month-over-month increase. The index for natural gas rose 1.8% month-over-month in September after decreasing 2.3% in August and 2.8% decrease in July.

Core CPI, which excludes more volatile food and energy prices, rose by 0.1% month-over-month in September for the second consecutive month. Over the past twelve months Core CPI increased by 1.7%.

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The shelter index rose 0.2% month-over-month in September for the fourth consecutive month.  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 expenditure’s, a 0.2% 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 eight consecutive months. In September, the real rent index rose by 0.1%. Over the past year, the real rental prices have risen by 1.2%.

Chart2


Rental Price Growth Continues to Exceed General Inflation

August 15, 2013

Data released by the Bureau of Labor Statistics indicates that consumer prices rose by 0.2% on a seasonally adjusted month-over-month basis in July. In June, the Consumer Price Index – Urban Consumer (CPI) increased by 0.5% month-over-month. Over the past twelve months, prices on expenditures made by urban consumers (as opposed to expenditures made by wage earners), grew by a not seasonally adjusted rate of 2.0%.

The slower pace of growth in the CPI partly reflects a deceleration in energy prices, especially energy commodities such as gasoline. The prices of energy services such as electricity declined over the month. In July, the Energy Price Index rose by 0.2% month-over-month after rising by 3.4% in June. Gasoline prices, which grew by 6.3% month-over-month in June, grew by only 1.0% in July. Electricity prices, which increased by 0.2% in June, fell by 0.3% in July. Meanwhile food prices, which grew by 0.2% in June, rose by 0.1% in July. Core CPI, which excludes more volatile food and energy prices, rose by 0.2% in month-over-month in July, matching the increase of this measure in both May and June. Over the past twelve months Core CPI has risen by 1.7%.

Presentation1

The month-over-month increase of consumer prices in July largely reflects growth of shelter prices, which rose by 0.2% over this period. A previous blog post showed that shelter prices represent the largest consumer expenditure in the CPI. As a result, the 0.2% increase in shelter prices will have a sizeable impact on headline CPI and a larger impact on Core CPI. The increase in shelter prices partly reflects the 0.2% increase in rental prices. 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, real rental prices fell in 2009. This decline in real rental prices corresponds to a period when the rental vacancy rate was high. Recently, real rental prices have begun to rise. The real rent index has increased for six consecutive months and 11 of the last 12 months. In July, the real rent index rose by 0.1%. Over the past year, the real rental prices have risen by 1.1%. The increase in real rental prices corresponds with a recent decline in the rental vacancy rate.

Presentation2


Consumer Prices Rise, But Real Rental Prices Unchanged

July 17, 2013

The Consumer Price Index – Urban Consumer (CPI), rose by a month-over-month seasonally adjusted rate of 0.5% in June. Following two months of falling prices, June marks the second consecutive month that consumer prices have risen. Over the past twelve months, consumer prices have risen by a not seasonally adjusted rate of 1.8%. Growth in core CPI, which excludes the more volatile food and energy prices, remained unchanged at 0.2%. Over the year, core CPI has risen by 1.6% on a not seasonally adjusted basis.

The month-over-month acceleration in overall consumer prices partly reflects a faster pace of monthly growth in energy prices. According to the BLS, energy prices rose by 3.4% on a monthly basis in June after growing by 0.4% in May. Over the past 12 months, energy prices have risen by 3.2%. Prices of energy commodities rose by 5.7% on a monthly basis in June as gasoline increased by 6.3%. However, over the past twelve months, prices of energy commodities have risen by only 2.6%.

Energy services rose by 0.1% on a monthly basis in June as the 0.2% increase in electricity prices was offset by a 0.4% decline in prices of utility gas. Over the past year, energy services prices have risen by 4.0% as utility gas prices have grown by 11.7% over this time period.

Food prices rose by 0.2% on a seasonally adjusted monthly basis in June reversing the 0.1% month-over-month decline that took place in May. Over the past twelve months food prices have risen by 1.4%.

Presentation1

Rental prices also rose over the month of June, but the growth rate in rental prices was similar to the change in the core-CPI.  As a result, month-over-month, real rental prices were virtually unchanged. Over the past twelve months, real rental prices have risen by 1.2%

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).

Presentation2


BLS: Consumer Prices Rise Modestly

June 18, 2013

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.

Presentation1

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%

Presentation2


Rental Price Growth Continues to Exceed Overall Inflation

May 17, 2013

The Bureau of Labor Statistics reported that its measure of consumer prices declined in April. According to the Consumer Price Index – Urban Consumer (CPI), prices faced by consumers declined by 0.4% on a month-over-month seasonally adjusted basis. This is the second consecutive monthly decline for the index. In March, consumer prices fell by 0.2%. Consumer prices have experienced three episodes of month-over-month declines in the past 6 months and 5 instances of monthly declines over the past twelve months. Over the past year, consumer prices have risen by 1.1% on a not seasonally adjusted basis.

As Chart 1 illustrates, the decline in consumer prices largely reflects falling energy prices. In April, energy prices declined by 4.3% on a month-over-month seasonally adjusted basis after falling by 2.6% in March. Gasoline prices were largely responsible for the decline in energy prices, falling by 8.1% in April. Over the past twelve months energy prices have declined by 4.3%. Meanwhile, food prices, which also display higher than average volatility, rose by 0.2% in April after remaining flat in March. Core CPI, which excludes both food and energy prices, rose by 0.1% in April, mimicking its growth rate in March. Over the past twelve months, core prices have risen by 1.7% on a not seasonally adjusted basis.

Presentation1

NAHB constructs a real rental price index by deflating the price index for rent by the index for overall inflation. This measure indicates whether inflation in rents is faster or slower than general inflation, excluding more volatile food and energy prices, and provides some insight into the supply and demand conditions for rental housing. When rents are rising faster (slower) than general inflation the real rent index rises (declines). Alternatively, the real rental price index also conveys information about the importance of the rental prices faced by consumers relative to their other expenditures and sheds some light on the relative importance of household expenditure items. In this way, an increase (decrease) in the real rent index also indicates that rental prices are a growing (shrinking) share of the overall expenditures made by consumers.

Computationally, the real rental price index and the relative weight calculation are closely related. As Chart 2 illustrates, the real rental price index and the relative weight of rental prices within core CPI follow a very similar trend. The relative weight measure is first calculated using not seasonally adjusted data and overall CPI in order to ensure proper measurement. Then core CPI is substituted for overall CPI and finally the not seasonally adjusted data is converted to its seasonally adjusted counterpart. In April, rental price inflation, 0.2%, exceeded core inflation, 0.1%. As a result, real rental prices faced by consumers increased. This is the third consecutive month that real rental prices have increased. Similarly, seasonally adjusted rental prices as a share of consumers’ overall expenditures also rose for the third consecutive month.

Presentation2


Consumer Prices Fall on Lower Gas Prices

April 16, 2013

The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index – Urban Consumer (CPI-U) fell by 0.2% on a seasonally adjusted monthly basis in March. The last month-over-month decline in the CPI-U occurred in November 2012, when prices also fell by 0.2%. According to this month’s release, the monthly decline in the CPI-U largely reflected a decrease in energy prices, gasoline in particular. Following a 5.4% increase in February, the Energy Index fell by 2.6% in March. Gasoline prices, which rose by 9.1% in February, fell by 4.4%. Meanwhile, food prices were unchanged after rising by 0.1% in February. Core CPI-U, which excludes more volatile energy and food prices, grew by 0.1% in March. Over the past twelve months, CPI-U has increased by 1.5% while core CPI-U has grown by 1.9%.

Presentation1

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). In March, real rental prices rose by 0.1%. Nominal rental prices rose by 0.2% while core inflation was 0.1%. As Chart 2 illustrates, real rental prices, which have been steadily increasing since June 2012, have surpassed the level established in May 2009.

Presentation2


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