Real Rents Increase, Indicate Weak Energy Prices
As a result of continued decline in the overall Consumer Price Index  (CPI), real (i.e., adjusted for inflation) residential rents continued to rise in November. The latest release of CPI data from the Bureau of Labor Statistics showed a decline in the overall price level  for the fourth straight month.   And the rate of decline accelerated to a seasonally adjusted annual rate of -18.4%.  As usual, the decline was led by a massive drop  in energy prices. The rate of increase for the "core" CPI (which excludes food and energy) was essentially zero. The core measure can be important, because the Federal Reserve tends to watch it.  A flat trend in the core CPI means that the Fed has little to worry about on the inflation from when setting interest rate targets. 

Meanwhile, the CPI subindex for residential rent increased at a rate of 3.6%. Although this took the real  rent index (which adjusts rent increases for inflation) up to a new high, the increase reflects weakness in energy prices more than strength in rental markets.

 

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. [ return to top ]