Courtesy of Mish.
Rents are up 6.5% in San Francisco, and 4.5% in numerous other cities. Is this a leading indicator for a stronger inflation as measured by the CPI.
Please consider the Variant Perception article Higher Rents in the US are a Strong Support for CPI.
Despite the subdued nature of US CPI, some large components are turning up. Owners’ equivalent rent and rent of primary residence, which together account almost of a third of the CPI basket, are turning up strongly. A low vacancy rate and a relatively resilient US economy is helping to drive rents higher, with San Francisco seeing the greatest rent increases, at 6.4% over the last year, and with many other cities, such as Nashville, Seattle, Denver and Houston, all seeing increases of over 4.5%
Furthermore, our leading indicator for US Shelter CPI, which includes apartment vacancy rates and the growth in the working-age population among its inputs, shows that the trend should continue. Higher rents are a strong support for headline CPI in the US.
Owners’ Equivalent Rent
Owners Equivalent Rent vs. CPI Shifted 18 Months
The red line in the above chart is not the CPI, but rather a “leading indicator for US Shelter CPI, which includes apartment vacancy rates”
I took the above chart, clipped out the red CPI line, made a layer out of it in Photoshop, and then shifted the line back 18 months with reduced opacity so you can see both lines. Here is my result.
Owners Equivalent Rent vs. CPI Shifted 18 Months and Not Shifted
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