Consumer Prices Post the Largest Gain in Three Decades

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Compared to a year ago, on a not seasonally adjusted basis, consumer prices increased by 6.2% in October, the largest year-over-year gain since December 1990. Supply-chain constraints and strong consumer demand as the economy reopened have contributed to recent price increases.

The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose by 0.9% in October on a seasonally adjusted basis, following an increase of 0.4% in September. Excluding the volatile food and energy components, the “core” CPI increased by 0.6% in October, after a 0.2% increase in September. In October, most component indexes increased. The indexes for energy (+4.8%), shelter (+0.5%), food (+0.9%), used cars and trucks (+2.5%), and new vehicles (+1.4%) showed sizeable monthly increases in October, while the indexes for airline fares (-0.7%) and for alcoholic beverages (-0.2%) declined.

In October, the price index for a broad set of energy sources increased by 4.8% in October, after a 1.3% increase in September. Gasoline (all type) rose by 6.1% in October. It marks its fifth consecutive monthly increase. The food index rose by 0.9% in October, the same monthly increase as in September.

The index for shelter rose by 0.5% in October, as the index for owners’ equivalent rent (OER) increased by 0.4% over the month, the largest monthly increase in the past five years.

NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than overall inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster (slower) than overall inflation, the real rent index rises (declines). The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components).

The Real Rent Index decreased by 0.2% in October, after an increase of 0.2% in September. Over the first ten months of 2021, the monthly change of the Real Rent Index was -0.2%, on average.



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