CPI Rises as Core Index and Energy Prices Climb Higher; Real Rents Inch Lower to kick off 2012


The Bureau of Labor Statistics (BLS) reported the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2% on a month-to-month basis during January 2012. Price levels rose across a fairly broad base of categories, as the core, energy and food indexes all registered increases compared to December. If not for the fact that natural gas prices continue to slump due to the abundant supplies created by shale production and above-average winter temperatures, energy prices would be contributing even more to growth in topline CPI as gasoline and crude oil prices have increased strongly in recent weeks.

Core CPI (which excludes energy and food prices) increased 0.2% last month, fueled mostly by large increases in apparel and medical equipment prices. Although core CPI has increased in each of the last 24 months, the overall rate of growth in non-food and non-energy consumer goods has been fairly tame. Indeed, on a year-over-year basis core CPI increased 2.3% in January and has increased at just 1.5% on an average annual basis since January 2009.

The CPI’s measure of housing costs, the shelter index, expanded 0.2% in January, roughly the same rate of month-to-month growth it has registered in each of the last 8 months. On a year-over-year basis, the shelter index increased 2%. With the recent tightening observed in the apartment rental market, rental rates have also been on the rise. NAHB’s measure of real rental rates, which is constructed from the CPI for rent of primary residences and overall CPI, did decline on a monthly basis for the first time since last summer; however, since hitting a cyclical low in mid-2011, the measure for real rents has climbed 2% on an annualized basis and could continue to rise further as apartment demand is expected to strengthen over the course of 2012 thanks to an improving job market.

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