Inflation Slows from 40-Year High in April

Consumer prices increased at a somewhat slower pace in April, the smallest monthly increase since August 2021, though inflation remains near a 40-year high. The food at home and shelter index rose at their fastest pace since November 1980 and April 1991. Though gas prices have fallen from their March highs, the pace of inflation will likely stay high in the months ahead as global supply chain disruption persists.

The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose by 0.3% in April on a seasonally adjusted basis, following an increase of 1.2% in March. Excluding the volatile food and energy components, the “core” CPI increased by 0.6% in April, following an increase of 0.3% in March. The food index increased by 0.9% in April, while the price index for a broad set of energy sources fell 2.7%.

Most component indexes continued to rise in April. The indexes for shelter (+0.5%), food (+0.9%), airline fares (+18.6%) and new vehicles (1.1%) showed sizeable monthly increases in April. The increase in airline fares index was the largest monthly increase since the inception of the series in 1963. Meanwhile, the indexes for gasoline fell by 6.1% in April, offsetting increases in natural gas (+3.1%) and electricity (+0.7%).

The index for shelter, which makes up more than 40% of the “core” CPI, rose by 0.5% in April. The indexes for owners’ equivalent rent (OER) increased by 0.5% and rent of primary residence (RPR) increased by 0.6% over the month. Monthly increases in OER have averaged 0.4% over the last three months. More cost increases are coming from this category, which will add to inflationary forces in the months ahead.

During the past twelve months, on a not seasonally adjusted basis, the CPI rose by 8.3% in April, following an 8.5% increase in March. The “core” CPI increased by 6.2% over the past twelve months, following a 6.3% increase in March. The food index rose by 9.4%, the largest annual increase since April 1981, and the energy index climbed by 30.3% over the past twelve months.

NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than overall inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster (slower) than overall inflation, the real rent index rises (declines). 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).

The Real Rent Index remained unchanged in April, after increasing by 0.1% in March. Over the first four months of 2022, the monthly change of the Real Rent Index remained virtually unchanged, on average.