Inflation and Rents Rising | Waccabuc NY Real Estate

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses inflation and the consumer price index.

• The consumer price index increased at the highest monthly pace in over 3 years.  The August consumer prices rose by 0.6 percent over a single month, or at a 7.5 percent annualized rate.
• There is normal volatility in month-to-month data so one should not assume this high rate of inflation will necessarily continue.  In fact, because of tame inflation in prior months, the 12-month inflation to August was only 1.7 percent.
• The big driver of inflation in August was higher gasoline prices, which jumped 9 percent in a single month.  Given that September gasoline prices have also been moving up and because of higher oil prices from the Fed’s decision to pump more money (i.e., more quantitative easing), inflation will be in high gear for at least the next few months.
• The rent component continues to make gains, albeit at a slightly slower rate than before.  August rents rose by 0.2 percent, leading to a 12-month gain of 2.6 percent.  While not in this report, many private companies tracking apartment rents have shown a higher rent increases.  For example, REIS reported 3.7 percent increase in apartment rents.
• The average hourly earnings reached $23.52 in August, which is up from $23.12 from one year ago.  However, the wage increase was essentially the same as the consumer price increase so there has been no improvement in purchasing power in the past 12 months for those people with jobs.  The social security recipients can expect the cost of living adjustment starting in January, 2013 to be around 2.0 to 2.5 percent based on recent trends inflation.