Housing inflation eased in September in ‘sharp reversal’ from previous month

September’s Consumer Price Index (CPI) report came in hotter than analysts expected, but the data offered one major point of optimism: shelter cost increases came down during the month, flashing an encouraging economic signal that the most stubborn contributor to inflation may finally be giving ground.

According to data from the Bureau of Labor Statistics released Thursday, shelter costs — which along with food contributed over 75% of the monthly increase in consumer prices — ticked up 0.2% month over month in September, lower than August’s 0.5% increase. On an annual basis, shelter cost increases rose 4.9% in September, down from August’s year-over-year gain of 5.2%.

“The sharp reversal in shelter inflation allays fears that it could reaccelerate after the jump in August and brings the trend back toward the gradual disinflation that we continue to expect,” said Parker Ross, global chief economist at Arch Capital Group.

For over a year the stickiness of rent prices reflected in the CPI report have confounded policymakers even as separate data has shown rents have come down from their 2022 highs. Economists have expected a slowdown in rent increases as the Federal Reserve’s tightening campaign eased pricing pressures across the economy. Part of the discrepancy can be explained because BLS collects rent data every six months.

 

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