Rent prices increased sharply in September

·1 min read

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.

Get market news worthy of your time with Axios Markets. Subscribe for free.

  • “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.

Like this article? Get more from Axios and subscribe to Axios Markets for free.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting