CPI data from BLS, chart by Mish

I repeat the core key theme for something like two years now. People keep telling me rents are falling, I keep doubting. The doubters have it correct again. If it’s any consolation for the “rents are falling” crowd, the cost of shelter only rose 0.3 percent in July, the smallest increase in 18 months.

However, rent of primary residence, the cost that best equates to the rent people pay, jumped 0.5 percent. Rent of primary residence has gone up at least 0.4 percent for 25 consecutive months!

All these “rents are falling” projections have been based on the price of new leases, but existing leases, vastly more important, keep rising, and this month rents jumped another 0.5 percent. The amusing thing now is the cost of new leases is rising again.

With rents out of the way, Let’s tune into the BLS Report for the details. 

CPI Month-Over-Month

• The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.6 percent in August on a seasonally adjusted basis, after increasing 0.2 percent in July,
• The index for gasoline was the largest contributor to the monthly all items increase, accounting for over half of the increase.
• The shelter index rose for the 40th consecutive month.
• The energy index rose 5.6 percent in August as all the major energy component indexes increased.
• The food index increased 0.2 percent in August, as it did in July. The index for food at home increased 0.2 percent over the month while the index for food away from home rose 0.3 percent in August.
• The index for all items less food and energy rose 0.3 percent in August, following a 0.2-percent increase in July.
• Indexes which increased in August include rent, owners’ equivalent rent, motor vehicle insurance, medical care, and personal care.
• The indexes for lodging away from home, used cars and trucks, and recreation were among those that decreased over the month.

CPI Shelter

Shelter Notes

• Shelter comprises 34.81 percent of the CPI
• Rent of primary residence is standard rent (not owner occupied), unfurnished without utilities.
• Owners’ Equivalent Rent (OER), is the estimated price one would pay to rent one’s own house, unfurnished and without utilities. It is the single largest CPI component at 25.62 percent.
• The shelter index increased 7.3 percent over the last year, accounting for over 70 percent of the total increase in all items less food and energy.

CPI Year-Over-Year

Year-over-year CPI data from the BLS, chart by Mish

Year-Over-Year Details

• Over the last 12 months, the all items index increased 3.7 percent before seasonal adjustment.
• Year-over-year the CPI has risen for two straight months.
• The all items less food and energy index rose 4.3 percent over the last 12 months.
• The energy index decreased 3.6 percent for the 12 months ending August
• The food index increased 4.3 percent over the last year.
• Shelter is up 7.3 percent from a year ago.

Sorry folks, as I state repeatedly, rent prices are NOT coming down, despite such reports for as mush as two years.

I will accept that the price of new leases is falling, but most renters do not move. Would you move to save $50 a month? $100? It’s not worth the hassle unless the new place is cheaper, nicer, and more convenient.

Most analysts have been expecting the price of shelter to come down. I have not been in that camp and still aren’t although we are getting closer to smaller increases.

The idea that the price of new leases leads the way for existing leases has certainly not lived up to its deceleration billing.

The Fed Commits to a 2 Percent Inflation Target, Carefully

On August 25, I noted The Fed Commits to a 2 Percent Inflation Target, Carefully

Let’s see how carefully it can thread this needle.

Powell’s Warnings

Powell stated: “As is often the case, we are navigating by the stars under cloudy skies.”

And to that I would add, using tools like inflation expectations proven to be totally worthless.

For discussion of inflation expectations and Biden’s energy goals guaranteed to be inflationary, please see Should the Fed Declare Defeat and Move On?

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