US Inflation more horrible than Washington admits

The US Consumer Inflation Report for October was horrible, showing a 12% annualized rate of price change. But it’s even worse than it looks. The shelter component of the index lags the more reliable private gauges of rent inflation. That means worse is to come.

Three US companies publish national rent indexes – CoreLogic, Zillow and Apartmentlist.com – and their readings of year-on-year rent inflation range from 9% to 16%. But the US Bureau of Labor Statistics reports a year-on-year rise in the rents of just 3.4%. Shelter represents a third of household expenditures according to the Consumer Price Index.

Before the COVID-19 pandemic, the private indices and the government measure of rent inflation moved in lockstep, albeit with lags in the latter reflecting the fact that not everyone’s lease expired at the same time. Given past lags, the rent increases should have shown up in CPI by now. So I really can’t explain the discrepancy.

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