Shelter Inflation May Still Have a Ways to Go

September’s consumer inflation data came in hot at 0.4% month-over-month. Shelter contributed about half of that number, with food (0.1%), new autos (0.03%), and services making up the rest. Used cars and Energy were both negative contributors (-0.43% and -0.2% respectively). 

On a year-over-year basis, energy is still playing a sizeable part (1.4%) along with food (1.6%)  and shelter (2.1%). The headline YoY number was 8.2%. 

Owners’ Equivalent Rent of Residences, one component of shelter CPI, represents how much homeowners think they would have to pay to rent an equivalent residence to their home. In September, this rose to 6.7% year-over-year nationally with regional numbers in the South and West reaching even higher (8.29% and 7.14% YOY respectively). 

Rent of Primary Residence is a more straightforward number representing rent. On a year-over-year basis, RPR rose to 7.21% nationwide with rents in the South nearing 10%.  

Because of the way the BLS gathers rental data, there is some sentiment that rents are somewhat lagged. As an alternative source, Zillow also provides rental data in its Zillow Observed Rent Index (ZORI). If we think of the ZORI as a leading indicator of rents, than shelter inflation has a ways to go. The ZORI peaked at 17% YoY back in February and has made its way down since. By August, rents were still up over 12% YoY. 

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