Source: FRED (Index: 1982-1984=100); Chart: Axios Visuals
A new red flag showed up in Wednesday’s Consumer Price Index: The amount that Americans pay for shelter rose sharply in September.
Why it matters: Rent is a big-ticket item — it’s the single largest monthly expense for many people. And when rent rises, it tends to be somewhat sticky.
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“We think [the cost of shelter] will play a more pronounced role in determining inflation and the shaping of inflation expectations going forward,” Joe Brusuelas, chief economist at RSM US, wrote in a research note.
Details: Rent at primary residences grew 0.5% last month, the largest monthly increase since 2001.
The cost of shelter overall, which includes rent and “owner equivalent rent” for homeowners (up 0.4%), makes up 32% of the CPI index — so rises here carry weight.
Over the last 12 months, shelter is up “only” 3.2%, which is more than historical inflation averages — but still lower than the current headline 5.4% rate.
What they're saying: “While one month does not make a trend, this is an early signal of stronger persistent inflation pressures materializing,” Bank of America analysts wrote of the rent figures, in a report Wednesday.
Context: Rents in some markets may still be making up lost ground from the depths reached last year.
The bottom line: “This might just be an overshoot after a couple of relatively modest increases, but we can’t rule out the idea that the fundamentals — rapid house price gains, more aggressive landlord pricing, low inventory, and faster wage growth — are pushing up the trend,” writes Ian Shepherdson, chief economist at Pantheon Macroeconomics.
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