Consumer Price Index

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the consumer price index.

• Lower gas prices drove overall prices down in November such that the Consumer Price Index (CPI) was 0.3 percent lower in the month. While this move would be dramatic if it were sustained, gasoline prices are highly variable from month-to-month. Even as consumers enjoy the extra money in their pockets from lower prices at the pump this month, they know that lower prices can quickly and easily change direction. For the year, overall prices are 1.8 percent higher - a smaller 12 month rise than in October.
• Core prices, those that exclude gas and food, actually rose 0.1 percent in November. Core prices were 1.9 percent higher for the year, also somewhat lower than the 2.0 percent figure in October and less than the 2 percent target the Federal Open Market Committee has explicitly stated as an inflation target.
• One of the big components of CPI, rents, increased faster than overall prices. Market rents moved up 0.2 percent in November after a 0.4 percent increase in October. They are up 2.7 percent from 12 months ago. Owner’s equivalent rent, what an owner might get if he or she rented out the home they own, are up 0.2 percent in November, marking 5 months of 0.2 percent or higher increases.
• While increasing rents paid by those in the rental market are bad news for the renters, increasing owner’s equivalent rents are good news for homeowners who typically have fixed mortgage payments. An increase in owner’s equivalent rent means that if the owner needed to rent out his or her home, he or she could probably earn more rent this year than last year for the same property.