The statistics agency of the US Department of Labour issued an email this week about the key factor behind the spike in the consumer price index in January, Bloomberg reported.
An email sent Tuesday to a group of “super users” of the data stated that the sharp rise in the rent inflation measure was due to an adjustment in the weighting of the index’s subcomponents. One recipient reported that the Bureau of Labour Statistics tried to retract it, but they were ordered to disregard its contents.
Federal Reserve officials cited a stronger-than-expected reading of the Consumer Price Index (CPI) as the reason for delaying a much-anticipated interest rate cut. Ian Shepherdson, chief economist at Pantheon Macroeconomics, stated that the information was relevant to inflation dynamics in the short term, as adjusted weights could keep rents elevated through the first half of the year.
The BLS “currently looking into this data, and we may have additional communication regarding the rent and OER data soon.”
An increase in the share of single-family homes in the OER compared to multifamily units would tend to give it a temporary boost. The supply of single-family homes has been limited, keeping prices high, while the supply of multifamily units has increased dramatically in recent years.
The acceleration in OER has puzzled analysts as the rate of growth in a similar, albeit smaller, component of CPI known as core housing rents continued to decelerate in January.
However, if the weighting explanation turns out to be correct, it could cause OER inflation figures to be elevated over the next few months, Shepherdson stated.
Prudence suggests [that] we should expect OER to rise at the January pace for the next five months, at which point it should revert to the rate of increase of primary rent.
