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CPI: Owner's Equivalent Rent Nearly Flat As Airfares Fall, Used Car Prices Up

October 13, 2020

Bottom Line: Core consumer price inflation rose less than expected in September after rebounding in July and August. Used car prices continued to gain as consumers sought private transportation. But transportation service prices were lower, led by airfares, as were apparel prices. Owner's equivalent rent, the critical component of shelter prices that accounts for nearly a third of core, was barely higher on the month and firmly trending lower now. While housing activity remained strong in September, the net impact of lower demand for urban housing and higher demand for less dense, single-family housing has pushed this broad price metric lower. Other key categories, like medical care commodities and services, were flat and trending slower. Overall, while there are pockets of inflation related to shifting demand during the pandemic (like autos), the trend remains muted, averaging in the 1.5 - 2% on core.

The CPI ROSE by 0.20% in September, compared with market expectations for an increase of 0.20%.

  • Food prices increased by 0.01% while energy prices rose by 0.8%.
  • Prices for gasoline rose by 0.1% while prices for fuel oil declined by 3.1%, prices for electricity climbed by 0.9%, and prices for natural gas rose by 4.2%.
  • Energy prices are now 7.6% BELOW their year-ago level.
Overall consumer prices are now 1.4% ABOVE their year-ago level; in September 2019, consumer prices were 1.7% ABOVE their year-ago level.

The Core CPI ROSE by 0.19%, compared with market expectations for an increase of 0.20%.

  • Prices for commodities excluding food and energy commodities rose by 0.8%.
  • Gains in used cars & trucks (+6.7%), tobacco (+0.4%), were offset by declines in apparel (-0.5%), alcoholic beverages (-0.2%).
  • Prices for services excluding energy services were nearly flat with shelter up just 0.06%, and transportation down 0.9%.
Core consumer prices are now 1.7% ABOVE their year-ago level; in September 2019, consumer prices were 2.3% ABOVE their year-ago level.

Article by Contingent Macro Advisors