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Where CPI inflation isn’t so high

Including a closer look at rents

There’s no doubt that consumer price inflation is relatively high. The consumer price index (CPI), though, is a composite of the prices of many goods and services. Thus, some show even higher inflation, such as energy and transportation, and others show lower inflation. This is what the FRED graph above is all about.

The blue bar shows overall CPI inflation. The other bars display specific categories with lower-than-average inflation. For example, both education and health services, which have had noteworthy price increases in the past, are showing much more restraint now. There are also puzzles, like alcoholic beverages, toys, and communications (for example, computers). Prices that are administratively set, such as water and trash collection, are fairly stable.

And then there’s a surprise: rents. The rent category in the CPI increases less than the overall CPI, but the news media have been referring to large rent increases for some time. Why the difference?

The reason is that the news media and the CPI consider different pools of rents. The news media mostly refer to rents that new renters face. The CPI has a rent pool that includes mostly continuing renters, whose rents are more stable or haven’t increased yet. In addition, the CPI’s rents survey samples participants every six months, precisely because rents are usually so stable. If rents have increased, there can be a delay in that increase showing up in the rents component of the CPI.

How this graph was created: Start from the CPI release table: Check the series to display, click “Add to Graph,” and shorten the sample period to the last two observations. From the “Edit Graph” panel, use the “Format” tab to choose the bar graph option.

Suggested by Christian Zimmermann.

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