The Bureau of Labor Statistics (BLS) released January Consumer Price Index (CPI) numbers today. On a seasonally adjusted basis, the CPI for All Urban Consumers rose 0.4 % in January, the same as in December. January and December are the largest monthly increases since the 0.7% rise in June 2009. On a year-over-year basis the index was up a moderate 1.6%.

Food and energy prices, which have been driving the CPI higher in recent months, accounted for two-thirds of the increase. Food prices rose 0.5% for the month and were up 1.8% from a year earlier. Energy prices rose a strong 2.1% in January after jumping 4.0% in December, and were up 7.3% from January 2010. Core CPI, which excludes food and energy prices, rose a modest 0.2% for the month and was up a moderate 1.0% from a year earlier.

NAHB forecasts that inflation as measured by the overall CPI will remain moderate throughout 2011, advancing 1.4% for the year. There will be some upward pressure on prices in 2012 with the CPI rising at a 1.7% annual rate in the fourth quarter.

The rental component of the CPI rose 0.2% for the third consecutive month and was up 1.0% from a year earlier. Owner’s equivalent rent, which is largely driven by the rent index without utilities and can be used as a measure of homeownership “prices”, rose 0.1% for the fourth consecutive month and increased 0.5% from a year earlier.

The rent and owner components of the CPI make up 31% of the CPI. The soft rental market and excess vacancies have kept rents from rising as fast as the general CPI over the past 12 months, with the year-over-year increase in the rental index lagging the CPI by 0.7%. Nevertheless, the rise in rents has matched the increase in the core CPI (1.0%). This is small solace to property owners who face higher energy costs that drive up their operating expenses. However, recent improvements in rental vacancy rates appear to already be leading to somewhat greater rent increases. Going forward, as the economy improves, rental vacancy rates should continue to fall, putting additional upward pressure on rents.