Inflation soared in May, with the CPI-U all-items index increasing 8.6% for the 12 months ranging from May 2021 to May 2022 — the largest 12-month increase since Dec. 1981, according to the Consumer Price Index (CPI) data released June 10. While the increase was broad-based, it’s notable that a key essential — shelter — increased in cost by 5.5% over the past year, the largest 12-month increase for that category since the period ending Feb. 1991, according to Bureau of Labor Statistics (BLS) data.
Ken Shinoda, portfolio manager at DoubleLine Capital, told GOBankingRates that, “The war in Ukraine continues to put pressures on supply which will keep oil and energy prices elevated. This is feeding through into headline CPI. What should be of more concern is that the shelter component of CPI continues to climb as high home prices feed into rental rates continuing their move higher.”
Indeed, the shelter index increased 0.6% in May, which represents the largest monthly increase since March 2004, according to the BLS. Meanwhile, the rent index rose 0.6% over the month, the same increase as in April, and the owners’ equivalent rent index also rose 0.6%.
Rusty Vanneman, chief investment strategist at Orion Advisor Solutions, told GOBankingRates that, “Peak inflation growth is still not here yet. While I’m optimistic that peak inflation is near, peak prices are still likely quite a ways away.”
Rent Increases Show No Sign of Slowing
Vanneman added that while higher food and energy prices are easy pain points to identify, housing rents — for both tenants and the rental value of owner-occupied homes — are still moving sharply higher.
“In short, expect rents to be a key inflationary factor for the remainder of this year and into the next as rents make up more than 30% of the overall CPI,” he said. “First, rents follow housing prices with a lag. Since COVID started, housing prices are up more than 30%. Rents, however, are not just asset driven. They are also income driven and since wage income is still rising rapidly, it’s not likely rents will slow very much soon,” he added.
“Rent, in addition to airfare and other travel costs, jumped tremendously over the past month,” Pawan Gupta, CEO of Fashinza, told GOBankingRates. “The reacceleration of inflation makes it difficult for consumers to afford everyday purchases let alone pay for rental housing and shelter. Coupled with the high unemployment rates, this inflationary period is taking a toll on Americans.”
And it’s not only primary residences which saw their prices skyrocket. The index for lodging away from home also rose 0.9% in May after larger increases in recent months. Over the year, the index rose a staggering 19.3%, according to BLS data.
This data is in line with figures provided by a recent Bloomberg report, one which noted that — according to hotel market data provider STR — hotel stay prices increased by around 33% across the U.S. over the last year, based on national averages from April and May, as GOBankingRates previously reported.
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