NAHB EYE ON HOUSING — Inflation accelerated in September, as prices for food and shelter showed notable gains. Federal Reserve officials described the current inflation run as “transitory”, and attributed recent increases largely to supply-chain constraints and a surge in consumer demand as the economy reopened. And they expected “inflation pressures to ease as the effect of these transitory factors dissipated.”

The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose by 0.4% in September on a seasonally adjusted basis, following an increase of 0.3% in August. Excluding the volatile food and energy components, the “core” CPI increased by 0.2% in September, after a 0.1% increase in August. The indexes for new vehicles (+1.3%), household furnishings and supplies (+1.3%), and motor vehicle insurance (+2.1%) rose in September, while the indexes for apparel (-1.1%), and several travel-related components including airline fares (-6.4%), lodging away from home (-0.6%), and used cars and trucks (-0.7%) all declined over the month.

In September, the indexes for food and shelter contributed more than half of the monthly increase in the headline CPI. The food index rose by 0.9% in September, the largest monthly gain since April 2020. The index for food at home jumped by 1.2%, while the index for food away from home rose by 0.5% over the month. The index for shelter rose by 0.4% in September. The index for owners’ equivalent rent (OER) increased by 0.4% over the month, the largest monthly increase in the past five years.

Meanwhile, the price index for a broad set of energy sources increased by 1.3% in September, after a 2.0% increase in August. Gasoline (all type) rose by 1.2% in September, slower than a 2.8% increase in August.

During the past twelve months, on a not seasonally adjusted basis, the CPI rose by 5.4% in September, following a 5.3% increase in August. The “core” CPI increased by 4.0% over the past twelve months, the same increase as the previous month. The food index rose by 4.6% and the energy index rose by 24.8% over the past twelve months.

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 rose by 0.2% in September, the same increase as in August. Over the first nine months of 2021, the monthly change of the Real Rent Index was -0.2%, on average.

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