Real Rents Recover and Tie Record High
 

In October, largely as a result of weakness in the overall economy, the real rent index recovered all the ground it lost since last year—shooting up 1.5 points to tie the previous record high of 109.4.  Although the residential rent component of the Consumer Price Index (CPI) increased at a very healthy (seasonally adjusted annual) rate of 4.3% during the month, the lion's share of the increase in the real rent index was due to the behavior of the overall CPI, which declined at an annual rate of nearly 11%.  (The real rent index adjusts changes in rent for overall inflation.)  

Based on seasonally adjusted Consumer Price Indices; U.S. Department of Labor, Bureau of Labor Statistics. The annual rates indicate what the percentage change would be if the current monthly rate were sustained over a 12-month period.The real rent index is the CPI for rent of primary residence divided by the CPI for all items and scaled so that January 1995 is 100.

As is often the case, the movement in the CPI was lead by a large swing in energy prices. However,the core CPI (i.e., the price index for all items excluding food and energy) also declined slightly in October. This is significant, because the weakness in the core measure suggests that the Federal Reserve will be less worried about inflation and focusing more on stimulating growth when setting monetary policy. [ return to top ]