VGSH - Fly In The Ointment: Month-To-Month Rent Inflation Accelerated Stuck At 6%+ Annualized Since March
2023-12-23 01:01:00 ET
Summary
- The PCE price index for rent accelerated to 0.50% in November from October, or 6.2% annualized, and has been in the same range since March.
- The PCE price index for rent decelerated to 6.7% YoY.
- The overall PCE price index, driven down by the plunge in gasoline prices, decelerated to 2.6%:
The fly in the ointment in today's PCE Price Index by the Bureau of Economic Analysis was rent inflation, which accelerated in November from October and has gotten stuck since March for the ninth month in a row with month-to-month increases that annualized were in the 6%-plus range. This stubborn rent inflation is a blow to the hopes trotted out for 18 months by the Fed and economists all over that it would come down further, that it was lagging, and that "we know it will come down," etc., etc., but it has not come down further, and today it accelerated.
But the overall PCE price index and "core" PCE price index (without food and energy) decelerated further, driven down by the plunge in gasoline prices, a month-to-month dip in food prices, and a continued big drop in durable goods prices that are coming off their huge pandemic spike.
The PCE price index for rent accelerated to 0.50% in November from October, or 6.2% annualized, and has been in the same range since March. In late 2022 through March 2023, rent inflation decelerated sharply on a month-to-month basis. But starting in March - amid the wild and woolly hopes that it would continue to decelerate, cited by Powell many times - PCE rent inflation has gotten stuck at annualized rates in the 6% range (blue box):
The CPIs for rents, released earlier in December , have shown a similar trend: Month-to-month rent inflation stopped coming down in early 2023 and has remained at around 6% annualized. And that's a tough nut to crack.
Year-over-year , the PCE price index for rent decelerated to 6.7%. This 12-month deceleration was driven by the sharp month-to-month deceleration late last year and earlier this year.
If month-to-month rent inflation continues on the same trend as since March, the year-over-year downward slope will begin to bend over the next few months and flatten by March 2024 around the 6% mark, close to double where it had been before the pandemic:
The "core" PCE price index , which excludes food and energy, decelerated to an increase of 0.06% in November from October (blue line), on a big drop in the index for durable goods (-0.43%) that are coming off their pandemic spike.
The three-month moving average, at 0.18%, has been roughly unchanged for the past three months (red). That translates into an annualized rate of 2.2%, which would be close to the Fed's target range.
Year-over-year, the "core" PCE price index decelerated to 3.2% (red line). The overall PCE price index, driven down by the plunge in gasoline prices, decelerated to 2.6%:
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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Fly In The Ointment: Month-To-Month Rent Inflation Accelerated, Stuck At 6%+ Annualized Since March