Housing costs rose again in August, but there’s an asterisk | ET REALITY

[ad_1]

The Consumer Price Index (CPI) increased 0.6% month over month and 3.7% year over year in August, the US Bureau of Labor Statistics reported On Wednesday. It is the second consecutive month of rising inflation: the CPI rose 0.2% in July.

Core inflation, which excludes food and energy, rose 4.3% in August, down from last month’s 4.7% annual increase but still well above the Federal Reserve’s 2% target. It is the metric most followed by the Federal Reserve.

Indices that increased in August include rent, landlord equivalent rent, motor vehicle insurance, health care and personal care. Among the items that decreased in the month were the rates of accommodation away from home, used cars and trucks, and recreation.

Gasoline was the biggest contributor in August, accounting for more than half of the monthly increase, while housing remained another big contributor.

“Housing has slowed year over year since April, but remains high, driving up services inflation,” he noted. first american Economist Ksenia Potapov.

Housing continues to contribute an enormous proportion to inflationary measures

If housing were excluded from the CPI calculation, inflation would be around 1%, he said brilliant MLS Lisa Sturtevant, chief economist. The rental index rose 7.2% in August, increasing for the 40th consecutive month. Meanwhile, rental growth slowed considerably and national median rents fell year over year in August, according to Sturtevant. Additionally, apartment construction is strong, putting additional pressure on homeowners to prevent them from becoming vacant. In the second quarter of 2023, the national unemployment rate was 6.3%, compared to 5.6% the previous year.

However, it takes months for those aggregate rent trends to show up in CPI measures.

Sturtevant hopes the Federal Reserve will take these trends into account when it takes its “data-driven” approach to deciding on interest rate policy at its FOMC meeting later this month.

“Recent declines in rental and housing prices are just beginning to be reflected in the CPI and will likely drag down the overall CPI until 2024,” Potapov added.

Lawrence Yun, chief economist at the National Association of RealtorsIt said the rise in monthly rent inflation was the slowest in two years, at 0.29%, or an annualized rate of 3.5%.

“Private sector apartment rental data implies even slower gains,” he said. “That means a heavy component of headline inflation will be much calmer in the coming months. Inflation will be a determining factor in upcoming monetary policy decisions. “Overdoing rate hikes, given that inflation is likely to calm down, will unnecessarily harm the economy.”

Traditionally, lower rents tend to be a good sign that inflation will ultimately continue to decline. However, falling rents could also boost rental demand, as some potential home buyers are locked out of home ownership by a mortgage of more than 7%.

“The key is to achieve a sustained supply of new homes in places where demand is strongest,” Sturtevant concluded.

Leave a Comment