In August, consumer prices rose by 0.1% 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.

The August release shows a slower pace of growth in prices for urban consumers for the second consecutive month. In July, the Consumer Price Index – Urban Consumer (CPI) increased by 0.2% month-over-month. In June, the Consumer Price Index – Urban Consumer (CPI) increased by 0.5% month-over-month.

The slower pace of growth in the CPI reflects a drop in energy prices, especially energy commodities such as natural gas. The Energy Price Index decreased by 0.3% month-over-month in August after rising slightly by 0.2% in July. The index for natural gas fell 2.3% month-over-month in August after a 2.8% decrease in July.

Core CPI, which excludes more volatile food and energy prices, rose by 0.1% month-over-month in August, down from the 0.2% increases observed in May, June, and July. Over the past twelve months, Core CPI increased by 1.8%.

Increases in the prices for medical care and shelter largely offset the decrease in energy prices. The medical care services index increased by 0.7% month-over-month in August. The shelter index increased by 0.2% over the same period. About one-third of the average consumers expenditure’s are shelter costs. Therefore, a 0.2% month-over-month increase represents a significant share of the current increases in both headline and core CPI.

The increase in the shelter index partly reflects increases in rental prices. However, the BLS measure does not isolate the change in rental prices from the changes in the overall price index. To isolate the change in rental prices, NAHB constructs a real rent price index. 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.

Recently, real rental prices have begun to rise after a large drop in 2009. The real rent index has increased for seven consecutive months. In August, the real rent index rose by 0.2%. Over the past year, the real rental prices have risen by 1.2%. The increase in real rental prices corresponds with a decrease in the rental vacancy rate.