Inflation Trajectory?


The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2% in March for the second consecutive month, compared to a 0.1% decline over the past 12 months. According to the latest release from the Bureau of Labor Statistics (BLS), the seasonally adjusted increase in March was the result of increases in the energy and shelter indexes offsetting a decrease in the food index.


The energy index, increasing for the second consecutive month after seven consecutive declines, rose 1.1% in March. The gasoline index, a component of the energy price index, increased 3.9% in March, the largest monthly increase since February 2013; however, the gasoline index has declined by 29.2% since last March. The natural gas index fell for a second consecutive month, and has decreased 14.4% over the past year.

The food index decreased 0.2% in March, reversing a 0.2% increase in February. Likewise, the index for nonalcoholic beverages decreased 0.6%, reversing its 0.6% February increase. The index for beef and veal increased for the fourteenth consecutive month, while the index for dairy products has decreased in the first three months of 2015.

Core CPI, which excludes the more volatile food and energy prices, has now increased 0.2% in each of the first three months of this year. The shelter index (a composite of rental prices, including rent of primary residences and owner-occupied imputed rent) increased 0.3% in March, following increases of 0.2% in February and 0.3% in January.

NAHB constructs a residential rent price index by deflating the price index for rent of a primary residence by the index for overall inflation. This measure indicates whether inflation in rents is changing 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).

Rental price increases continued to modestly outpace overall inflation, but the growth in real rental prices is expected to moderate, suggesting a better balance between the supply of and demand for multifamily rental units.


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