Supply-Side Cost Pressures Drove Housing as Inflation Leader in 2024

2025-10-03T09:20:31-05:00

Though the rate of inflation peaked in June 2022, consumer prices continued to increase throughout 2023 and 2024 as inflation drove further price growth, according to 2024 CPI review from the Bureau of Labor Statistics. Nonetheless, the rate of inflation slowed from 3.4% in 2023 to 2.9% in 2024. All major categories experienced price increases in 2024, though only three out of eight accelerated, including medical care, education and communication, and apparel. While all spending categories contributed to price growth in 2024, housing was the key driver of inflation, accounting for 63.5% of the total CPI increase in 2024. The housing category includes three main components: shelter (rent and owner’s equivalent rent), fuels and utilities, and household furnishings and operations. After peaking at an 8.2% growth rate in January 2023, housing inflation has eased from 4.8% in 2023 to 4.1% in 2024. The shelter component represents about 80% of total housing costs. Shelter inflation has moderated from 6.2% to 4.6% between 2023 and 2024. Despite this deceleration, shelter still accounted for 36.7% of consumer spending in the CPI and contributed approximately 58% of total inflation in 2024. This suggests persistent shelter inflation was the major reason that kept inflation elevated above the Fed’s 2% target. While the Fed rate cuts could ease some housing market pressure, the central bank’s ability to address rising housing costs is limited. Shelter inflation is driven by a lack of affordable supply and rising construction costs. Tight monetary policy hurts housing supply by increasing financing cost. Higher mortgage rates and elevated home prices also price out potential homebuyers, driving up rental demand and worsening the housing affordability. This can be seen on the graph below, even as mortgage rates surged from 3% to 7%, shelter inflation continued to rise despite Fed policy tightening. Additional housing supply is the primary solution to ease housing inflation and overall inflation. This suggests construction costs, including building materials, matter not just for housing but also for overall inflation and future monetary policy. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Supply-Side Cost Pressures Drove Housing as Inflation Leader in 20242025-10-03T09:20:31-05:00

Consumer Confidence Drops on Job Concerns

2025-10-01T08:24:16-05:00

Consumer confidence fell to a five-month low as consumers remain concerned about reignited inflation and a weakening labor market amid economic uncertainty. The labor market differential, which measures the gap between consumers viewing job as plentiful and hard-to-get, has narrowed for nine straight month and is now at lowest level since March 2021. This is consistent with recent job reports showing fewer job openings and slower hiring. The Consumer Confidence Index, reported by the Conference Board, is a survey measuring how optimistic or pessimistic consumers feel about their financial situation. This index fell from 97.8 to 94.2 in September, the lowest level since April. The Consumer Confidence Index consists of two components: how consumers feel about their present situation and their expected situation. In September, the Present Situation Index decreased 7.0 points from 132.4 to 125.4, the largest monthly decline since September 2024; the Expectation Situation Index dropped 1.3 points from 74.7 to 73.4. This is the eighth consecutive month that the Expectation Index has been below 80, a threshold that often signals a recession within a year. Consumers’ assessment of current business conditions deteriorated in September. The share of respondents rating business conditions “good” decreased by 2.3 percentage points to 19.5%, while those claiming business conditions as “bad” rose by 0.8 percentage points to 15.4%. Meanwhile, consumers’ assessments of the labor market cooled further in September. The share of respondents reporting that jobs were “plentiful” fell by 3.3 percentage points at 26.9%, the lowest level since March 2021; meanwhile, those who saw jobs as “hard to get” stayed unchanged at 19.1%. Consumers were more pessimistic about the short-term outlook. The share of respondents expecting business conditions to improve fell from 20.2% to 18.7%, while those expecting business conditions to deteriorate declined from 23.5% to 22.3%. Similarly, expectations of employment over the next six months were more negative. The share of respondents expecting “more jobs” decreased by 1.8 percentage points to 16.1%, and those anticipating “fewer jobs” fell by 0.3 percentage points to 25.6%. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Consumer Confidence Drops on Job Concerns2025-10-01T08:24:16-05:00

2025 Second Quarter State-Level GDP Data

2025-09-26T14:15:02-05:00

Real gross domestic product (GDP) increased in 48 states in the second quarter of 2025 compared to the first quarter, according to the U.S. Bureau of Economic Analysis (BEA). Mississippi and Arkansas reported declines, while the District of Columbia reported no change during this time. Growth was geographically broad but varied considerably in magnitude, ranging from a 7.3 percent increase in North Dakota to a 1.1 percent decline in Arkansas.   Nationwide, growth in real GDP (measured on a seasonally adjusted annual rate basis) increased 3.8 percent in the second quarter of 2025. The leading contributors to the increase in real GDP across the country were finance and insurance; information; and nondurable-goods manufacturing.      Regionally, real GDP increased in all eight regions between the first and the second quarter of 2025. The percent change in real GDP ranged from a 2.9 percent increase in the Southeast region to a 6.0 percent increase in the Southwest region.           The strong performance in North Dakota, Texas, Kansas, New Mexico, and Wyoming reflected outsized contributions from mining, quarrying, and oil and gas extraction, underscoring the continued importance of the energy sector in driving state-level outcomes. At the same time, finance and insurance, information, and nondurable-goods manufacturing provided steady growth contributions across most regions, supporting broad-based gains. While the majority of states experienced moderate to strong expansion, a small number of states in the South and Midwest posted flat or declining GDP, highlighting ongoing sectoral challenges such as weaker agricultural output, subdued consumer spending, or slower goods production. At the industry level, finance and insurance, information services, and nondurable-goods manufacturing were the most consistent contributors to state-level GDP growth nationwide, while mining and energy extraction provided a particularly strong lift in western and energy-rich states. However, several sectors weighed on growth in specific regions. Agriculture, forestry, fishing, and hunting contracted in parts of the Midwest and Plains, offsetting gains elsewhere and contributing to weaker results in states with heavy reliance on farm output. In addition, durable-goods manufacturing was a mixed performer, with softness in transportation equipment and machinery limiting growth in certain industrial states. The divergence in growth rates illustrates the uneven distribution of economic momentum across the country, shaped largely by differences in industrial composition. Energy-producing states continued to benefit from elevated demand and investment in extraction industries, while states with less exposure to these sectors showed more modest gains. Overall, the data point to an economy that remains resilient at the national level but with significant regional disparities, emphasizing the influence of industry-specific factors on state growth trajectories. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

2025 Second Quarter State-Level GDP Data2025-09-26T14:15:02-05:00

Shelter Inflation Continued to Cool

2025-09-15T11:18:35-05:00

Inflation accelerated to a seven month high in August as tariff-related costs continued to pass through to consumers, according to the Bureau of Labor Statistics’ (BLS) latest report. Core goods prices, which exclude volatile food and energy, rose by 1.5% in August, the fastest annual pace since May 2023. Meanwhile, housing inflation continued to show signs of cooling, matching the lowest level since October 2021. Though inflation is likely to remain elevated this year, the Fed is expected to restart easing due to recent weaker job reports. Given the housing market’s sensitivity to interest rates, this could help ease the affordability crisis and support housing supply even as builders continue to face supply chain challenges. During the past twelve months, on a non-seasonally adjusted basis, the Consumer Price Index rose by 2.9% in August, the highest reading since January 2025. Excluding the volatile food and energy components, the “core” CPI increased by 3.1% over the past twelve months. A large portion of the “core” CPI is the housing shelter index, which increased 3.6% over the year, the lowest reading since October 2021.  Meanwhile, the component index of food rose by 3.2%, and the energy component index increased by 0.2%. On a monthly basis, the CPI rose by 0.4% in August (seasonally adjusted), after a 0.2% increase in July. The “core” CPI increased by 0.3% in August, unchanged from July. The price index for a broad set of energy sources rose by 0.7% in August, with declines in natural gas (-1.6%) and fuel oil (-0.3%) offset by increases in gasoline (+1.9%) and electricity (+0.2%). Meanwhile, the food index rose by 0.5% in August, after being unchanged in July. The index for food away from home increased by 0.3%, while the index for food at home fell by 0.6%. The index for shelter (+0.4%) continued to be the largest contributor to the monthly increase in all items index. Other top contributors that rose in August include indexes for airline fares (+5.9%), used cars and trucks (+1.0%), apparel (+0.5%) as well as new vehicles (+0.3%). Meanwhile, the index for medical care (-0.2%), recreation (-0.1%) and communication (-0.1%) were among the few major indexes that decreased over the month. The index for shelter makes up more than 40% of the “core” CPI, rising by 0.4% in August, following a 0.2% increase last month. The index for owners’ equivalent rent (OER) rose by 0.4% and index for rent of primary residence (RPR) increased by 0.3% over the month. Despite the moderation, shelter costs remained the largest contributors to headline inflation.  NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than core inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster than core inflation, the real rent index rises and vice versa. The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components). In August, the Real Rent Index remained unchanged. Over the first eight months of 2025, the average monthly growth rate remained flat at 0.0%, slower than the average of 0.1% in 2024. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Shelter Inflation Continued to Cool2025-09-15T11:18:35-05:00

Household Real Estate Asset Values Reach New High

2025-09-12T09:15:06-05:00

The market value of household real estate assets rose to $49.3 trillion in the second quarter of 2025, according to the most recent release of U.S. Federal Reserve Z.1 Financial Accounts. The value rose by 2.7% from the first quarter and is 1.1% higher than a year ago. This measure of market value estimates the value of all owner-occupied real estate nationwide. The calculation combines both repeat-home sales data with estimates of additions to the housing stock, essentially measuring both price changes and the change in quantity of housing assets. This approach helps explain why household real estate wealth can continue to rise even as other measures may show a slowing in home price growth. Real estate secured liabilities of households’ balance sheets, i.e. mortgages, home equity loans, and HELOCs, increased 0.8% over the second quarter to $13.5 trillion. This level is 2.8% higher compared to the second quarter of 2024. Owners’ equity share1 of real estate assets was 72.6% in the second quarter, marking an increase in owners’ equity share from the first quarter. The share in the second quarter of 2024 was 73.0% and has been above 70% for 14 consecutive quarters, the longest stretch since the 1950s. Owners’ equity in real estate was $35.8 trillion in the second quarter. Owners’ equity as a percentage of household real estate; Difference between assets and liabilities as a share of assets Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Household Real Estate Asset Values Reach New High2025-09-12T09:15:06-05:00

Year-over-Year Building Material Price Growth Advances  

2025-09-10T11:19:08-05:00

Price growth for residential building materials rose for the fourth straight month in August, reaching its highest level since January 2023.  Across domestic inputs goods and services into residential construction, service prices decreased in August while goods prices slightly advanced.   Prices for inputs to new residential construction—excluding capital investment, labor, and imports—fell 0.1% in August, matching the decrease of 0.1% in July. These figures are taken from the most recent Producer Price Index (PPI) report published by U.S. Bureau of Labor Statistics. The PPI measures prices that domestic producers receive for their goods and services; this differs from the Consumer Price Index which measures what consumers pay and includes both domestic products as well as imports.   The inputs to the new residential construction price index grew 2.3% from August of last year. The index can be broken into two components—the goods component increased 2.6% over the year, while services increased 1.9%. For context, the total final demand index, which measures all goods and services across the economy, increased 2.6% over the year, with final demand with respect to goods up 2.1% and final demand for services up 2.9%. Compared to July, the August results indicate services price growth slowed while goods price growth rose according to producer prices. Input Goods The goods component has a larger importance to the inputs to residential construction price index, representing around 60%. On a monthly basis, the price of input goods to new residential construction was up 0.1% in August.   The input goods to residential construction index can be further broken down into two separate components, one measuring energy inputs with the other measuring remaining goods. The latter of these two components simply represents building materials used in residential construction, which makes up around 93% of the goods index.   Energy input prices fell 1.8% in August and were 7.5% lower than one year ago. Building material prices were up 0.3% in August and up 3.4% compared to one year ago. This was the second straight month of above three percent price growth, after increasing 3.3% in July. The August yearly increase was the largest since building material prices rose 4.9% in January of 2023.  Input Services Prices for service inputs to residential construction reported a decrease of 0.5% in August. On a year-over-year basis, service input prices are up 1.9%. The price index for service inputs to residential construction can be broken out into three separate components: a trade services component, a transportation and warehousing services component, and a services excluding trade, transportation and warehousing component (other services).   The most significant component is trade services (around 60%), followed by other services (around 29%), and finally transportation and warehousing services (around 11%). The largest component, trade services, was up 2.0% from a year ago. The other services component was up 1.5% over the year.  Lastly, prices for transportation and warehousing services rose 1.9% compared to August of last year.   Expanded Inputs to New Construction Data Within the PPI that BLS publishes, new experimental data was recently published regarding inputs to new construction. The data expands existing inputs to industry indexes by incorporating import prices with prices for domestically produced goods and services. With this additional data, users can track how industry input costs are changing among domestically produced products and imported products. This data focuses on new construction, but the complete dataset includes indices across numerous industries that can be found here on BLS website.  New construction input prices are primarily influenced by domestically produced goods and services, with domestic products accounting for 90% of the weight of the industry index for new construction. Imported goods make up the remaining 10% of the index.   The latest available data, for June 2025, showed that domestically produced goods continue to have faster price growth compared to imported goods used in new construction. On a year-over-year basis, the index for domestic goods increased 2.3%, while prices for imported goods fell 1.1% over the same period. Comparatively, service prices have risen more than good prices over the past year, rising 3.0% year-over-year. The combined index for inputs to new construction is up 2.1% on a yearly basis.    Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Year-over-Year Building Material Price Growth Advances  2025-09-10T11:19:08-05:00

Powell Appears to Signal Rate Cuts Due to Evolving Circumstances

2025-08-22T12:19:40-05:00

While acknowledging that ongoing uncertainty complicates policymaking, Federal Reserve Chair Powell gave a mostly green light for monetary policy easing in September, following a policy pause that has lasted since the end of last year. Noting that inflation remains elevated, Powell stated that “the balance of risks appears to be shifting.” In particular, the central bank chair noted that downside risks for the labor market are rising. The implication of this observation is that easing is in view for monetary policy given the Fed’s dual mandate of maintaining both price stability and full employment. Markets expect a cut in September. Powell detailed an important point for the housing demand, that the labor market has avoided large job losses due to policy tightening and the economy has shown “resilience.” The Fed chair also indicated that inflation pressure is now in the data from tariffs, including a rise in goods prices. However, Powell articulated the view that while tariffs can affect the price level, that effect may not be a persistent impact on inflation and therefore can be consistent with near-term easing of monetary policy. He stated, “…the effects will be short-lived – a one-time shift in the price level.” However, he also warned that “one-time” does not mean all at once and that the effects of tariffs will materialize over an adjustment period. Moreover, while not addressed in today’s comments, some of the pressure from tariffs is being relaxed as trade deals are arranged and de-escalations of some trade tensions are undertaken. This morning’s action by Canada to drop most retaliatory trade actions against the U.S. is a good example, as is the ongoing discussions with China to achieve a fairer, more sustainable trading relationship. Powell repeated that housing-related inflation remains on a downward trend. I would add for emphasis that softening of housing market data (including home price weakness that will indirectly affect inflation data) is a dovish sign for future monetary policy given that housing has been the major source of inflation for the last two years. Summarizing the current data and the monetary policy outlook, Powell concluded his analysis with commentary suggesting a shift in the Fed’s policy stance to easing (perhaps as a preventative cut), while still tied to data: “In the near term, risks to inflation are tilted to the upside, and risks to employment to the downside—a challenging situation. When our goals are in tension like this, our framework calls for us to balance both sides of our dual mandate. Our policy rate is now 100 basis points closer to neutral than it was a year ago, and the stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance. Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance. Monetary policy is not on a preset course. FOMC members will make these decisions, based solely on their assessment of the data and its implications for the economic outlook and the balance of risks. We will never deviate from that approach.“ Chair Powell’s comments also emphasize the importance of central bank independence. Politicizing monetary policy would introduce a future inflation premium into the bond market, resulting in reduced investor demand and some additional upward pressure on long-term interest rates, including mortgage rates. Today’s speech also addressed the Fed’s policy framework, including “flexible average inflation targeting” and the central bank’s 2% target for inflation. Powell committed to the 2% target. While this commitment is important for institutional credibility and bond market confidence, some economists, including myself, question the appropriateness of 2% as a target given U.S. economic and productivity growth. Would, as a theoretical question, a 2.5% inflation target in a period of declining birth rates and rising technological change unanchor inflation expectations for investors? This is an important question for future monetary policymaking. Nonetheless, today’s speech suggests, and the market expects, that the Fed will resume monetary policy easing at its September meeting. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Powell Appears to Signal Rate Cuts Due to Evolving Circumstances2025-08-22T12:19:40-05:00

Building Material Prices Rise in July

2025-08-14T10:28:37-05:00

Prices for residential building materials rose again in July, marking the largest year-over-year increase in over two years. The underlying price growth trend remained the same, with service prices continuing to grow at a faster pace than goods prices. Similar to last month, parts for construction machinery and metal molding/trim experienced significant price growth, as both increased over 25% compared to last year. Prices for inputs to new residential construction—excluding capital investment, labor, and imports—rose 0.2% in July, following a 0.8% increase in June. These figures are taken from the most recent Producer Price Index (PPI) report published by U.S. Bureau of Labor Statistics. The PPI measures prices that domestic producers receive for their goods and services; this differs from the Consumer Price Index which measures what consumers pay and includes both domestic products as well as imports. The inputs to the new residential construction price index grew 2.8% from July of last year. The index can be broken into two components­—the goods component increased 2.4% over the year, while services increased 3.3%. For comparison, the total final demand index, which measures all goods and services across the economy, increased 3.3% over the year, with final demand with respect to goods up 1.9% and final demand for services up 4.0%. Input Goods The goods component has a larger importance to the total residential construction inputs price index, representing around 60%. On a monthly basis, the price of input goods to new residential construction was up 0.4% in July. The input goods to residential construction index can be further broken down into two separate components, one measuring energy inputs with the other measuring remaining goods. The latter of these two components simply represents building materials used in residential construction, which makes up around 93% of the goods index. Energy input prices jumped up 3.9% between June and July but were 8.1% lower than one year ago. Building material prices were up 0.2% between June and July and up 3.3% compared to one year ago. Tariffs on building materials do not directly show up in the PPI data because the PPI measures prices for domestically produced goods and services. In fact, tariffs and taxes are explicitly excluded from the PPI. Despite this, price changes in reaction to tariffs are included in the PPI, meaning price increases to pass on increased costs of materials will show up in this pricing data.  Announced tariffs in recent months have resulted in material increases across a few different goods, specifically certain metal products and equipment. In July, the largest year-over-year input price increase was for construction machinery and equipment parts, reporting a 31.4% increase over the year. Meanwhile, metal molding and trim prices were up 25.6%, fabricated steel plate prices were up 14.3%, and nonferrous wire/cable up 10.5%. Metal commodities have been the primary targets of tariffs, with 50% tariffs in effect on steel and aluminum products and a 50% tariff on semifinished products of copper. Input Services Prices for service inputs to residential construction reported a decrease of 0.2% in July. On a year-over-year basis, service input prices are up 3.3%. The price index for service inputs to residential construction can be broken out into three separate components: a trade services component, a transportation and warehousing services component, and a services excluding trade, transportation and warehousing component (other services).  The most significant component is trade services (around 60%), followed by other services (around 29%), and finally transportation and warehousing services (around 11%). The largest component, trade services, was up 5.2% from a year ago. The other services component was up 1.2% over the year.  Lastly, prices for transportation and warehousing services fell 0.6% compared to July of last year. Inputs to New Construction Satellite Data Within the PPI that BLS publishes, new experimental data was recently published regarding inputs to new construction. The data expands existing inputs to industry indexes by incorporating import prices with prices for domestically produced goods and services. With this additional data, users can track how industry input costs are changing among domestically produced products and imported products. This data focuses on new construction, but the complete dataset includes indices across numerous industries that can be found here on the BLS website. New construction input prices are primarily influenced by domestically produced goods and services, with domestic products accounting for 90% of the weight of the industry index for new construction. Imported goods make up the remaining 10% of the index. The latest available data, for May 2025, showed that domestically produced goods have experienced faster price growth compared to imported goods used in new construction. On a year-over-year basis, the index for domestic goods increased 1.6%, while prices for imported goods rose 0.1% over the same period. Comparatively, service prices have risen more than good prices over the past year, rising 2.7% year-over-year. Across the three indexes, all inputs remain at higher levels compared to pre-pandemic prices. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Building Material Prices Rise in July2025-08-14T10:28:37-05:00

U.S. Economy Rebounded in Second Quarter

2025-08-13T11:16:12-05:00

Real GDP growth rebounded in the second quarter, driven by a turnaround in the trade balance and stronger consumer spending. According to the “advance” estimate released by the Bureau of Economic Analysis (BEA), real gross domestic product (GDP) expanded at an annual rate of 3.0% in the second quarter of 2025, following a 0.5% contraction in the first quarter. The latest data from the GDP report suggests that inflationary pressures are easing. The GDP price index rose 2.0% for the second quarter, down from a 3.8% increase in the first quarter of 2025. The Personal Consumption Expenditures Price (PCE) Index, which measures inflation (or deflation) across various consumer expenses and reflects changes in consumer behavior, rose 2.1% in the second quarter. This is down from a 3.7% increase in the first quarter of 2025. This quarter’s increase in real GDP primarily reflected a decrease in imports, which are a subtraction in the calculation of GDP, and increases in consumer spending. Consumer spending, the backbone of the U.S. economy, rose at an annual rate of 1.4% in the second quarter, up from 0.5% in the first quarter but well below the 2.8% pace recorded a year earlier. Both goods and services contributed to the gain, with goods spending rising at a 2.2% annual rate and spending on services increasing at a 1.1% annual rate. A steep drop in imports also provided a significant boost to GDP, as imports are subtracted in GDP calculations. Imports fell 30.3% in the second quarter, a sharp reversal from the 37.9% surge in the first quarter. Nonresidential fixed investment increased 1.9% in the second quarter. The increases in equipment (+4.8%) and intellectual property products (+6.4%) offset the decrease in structures (-10.3%). Meanwhile, residential fixed investment (RFI) declined 4.6% in the second quarter, following a 1.3% decline in the previous quarter. Within the residential category, single-family structures fell 12.6% at an annual rate, multifamily structures declined 1.3%, and improvements rose 4.2%. For the common BEA terms and definitions, please access bea.gov/Help/Glossary. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

U.S. Economy Rebounded in Second Quarter2025-08-13T11:16:12-05:00

Core Inflation Accelerates Amid Tariff Pressure

2025-08-12T10:20:25-05:00

Inflation held steady at 2.7% in July as food an energy prices remained subdued and offset increases in service prices, according to the Bureau of Labor Statistics’ (BLS) latest report. Core inflation, which exclude volatile food and energy, picked up to its largest monthly increase since January and fastest annual pace since February. Meanwhile, housing inflation continued to show signs of cooling, matching the lowest level since October 2021. Despite the modest overall increase, concerns over inflation data quality continue to grow as BLS revealed more details about data collection challenges. BLS reduced its CPI collection sample starting in April due to staffing shortages, suspending data collection in Lincoln (NE), Provo (UT), and Buffalo (NY). It also suspended collection on 15% of the sample in 72 other areas on average. When prices are unavailable, BLS uses different cell imputation, and this share jumped to 35% in June from 30% in May and just 8% in June 2024. During the past twelve months, on a non-seasonally adjusted basis, the Consumer Price Index rose by 2.7% in July, unchanged from June and the highest since February 2025. Excluding the volatile food and energy components, the “core” CPI increased by 3.1% over the past twelve months. A large portion of the “core” CPI is the housing shelter index, which increased 3.7% over the year, the lowest reading since October 2021.  Meanwhile, the component index of food rose by 2.9%, and the energy component index fell by 1.6%. On a monthly basis, the CPI rose by 0.2% in July (seasonally adjusted), after a 0.3% increase in June. The “core” CPI increased by 0.3% in July. The price index for a broad set of energy sources fell by 1.1% in July, with increases in fuel oil (+1.8%) offset by declines in gasoline (-2.2%), natural gas (-0.9%) and electricity (-0.1%). Meanwhile, the food index was unchanged, after a 0.3% increase in June. The index for food away from home increased by 0.3% while the index for food at home fell by 0.1%. The index for shelter (+0.2%) continued to be the largest contributor to the monthly increase in all items index. Other top contributors that rose in July include indexes for medical care (+3.5%), airline fares (+4.0%), recreation (+0.4%), household furnishings and operation (+3.4%), as well as used cars and trucks (+0.5%). Meanwhile, the index for lodging away from home (-1.0%) and communication (-0.3%) were among the few major indexes that decreased over the month. The index for shelter makes up more than 40% of the “core” CPI, rising by 0.2% in July, following the same increase last month. The index for owners’ equivalent rent (OER) and for rent of primary residence (RPR) both increased by 0.3% over the month. Despite the moderation, shelter costs remained the largest contributors to headline inflation. NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than core inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster than core inflation, the real rent index rises and vice versa. The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components). In July, the Real Rent Index fell by 0.1%. Over the first seven months of 2025, the average monthly growth rate held steady at 0.1%, unchanged from the same period in 2024. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Core Inflation Accelerates Amid Tariff Pressure2025-08-12T10:20:25-05:00
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