Growing Rent Prices Helped US Inflation Rise Again

Growing Rent Prices Helped US Inflation Rise Again
Paul Allison, CFA

about 2 months ago1 min

What’s going on here?

Inflation nudged up by a more-than-expected 0.4% in September, as rent prices settled into a much more premium location.

What does this mean?

Temperatures might be cooling down in many countries as summer evenings turn into winter nights, but not in the US. Well, at least as far as inflation’s concerned. Prices were 0.4% higher in September than August, locking them in at 3.7% hotter than the same time last year. But at least that’s moving in the right direction, clocking in slightly below August’s 0.6% increase. And when you remove volatile food and energy prices from the mix, the resulting “core inflation” rose 0.3% – bang in line with analysts’ forecasts.

US inflation
Source: Bloomberg

Why should I care?

Zooming in: Renting is rough.

Shelter costs like rent and mortgages were responsible for around 70% of core inflation’s rise. Now, those types of costs bleed into inflation with a lag. Landlords, for one example, need to wait until leases are up for renewal before hiking up rents. And with mortgage rates still on the up across the US, we may see a slow but steady climb for months to come, at least.

The bigger picture: High price tags look like a steal.

Not to sound all doom and gloom, but those rent rises aren’t the only issue we’re up against. Motor insurance is 20% more expensive than the same time last year, although that’s partly due to a supply shortage of cars. And when prices in general are higher than usual, shoppers are actually tempted to stock up in case everything gets more expensive going forward. That demand ramps up prices a little bit extra, making it harder for central banks to tame runaway inflation.

Inflation across the US
Source: Bloomberg


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