Economists' Outlook

Housing stats and analysis from NAR's research experts.

Instant Reaction: Consumer Price Index, June 10, 2021

Inflation rose more than expected in May to the fastest pace since 2008. Over the last 12 months, inflation rate rose 5.0%, compared to 4.2% in April and 2.6% in March, respectively. In the meantime, economists and policymakers typically pay close attention to core inflation, which is the overall inflation rate excluding Food and Energy. In May, core inflation also rose to 3.8%, well above the Federal Reserve's 2.0% core target. Nevertheless, remember that the Fed has reassured that it will allow inflation to run above the 2.0% goal since it has been below that target for more than a year.

Due to the base effect, these higher readings were expected, especially for the period from March through May. Last year, prices were weak as nearly all states were under pandemic-related restrictions. However, the CPI basket started to rise last June and the year-over-year comparisons will be more realistic in upcoming months.

Parsing out by expenditure category, inflation seems to be rising mainly due to the supply – demand imbalances as the economy reopens and people resume traveling, going to restaurants, bars, events and shows. In the meantime, keep in mind that consumers have saved like never before during the pandemic. As a result, prices for airline fares rose 24.1% over the past 12 months. Similarly, prices for used cars and trucks were 29.7% higher than a year earlier.

While people are moving back to big city centers, rents are also expected to rise faster. For instance, the number of people moving in a zip code in New York City has risen so far by 41% in 2021 compared to 2020; 29% compared to 2019; 23% compared to 2018. Specifically, rents rose by 1.8% over the past 12 months to May nearly at the same pace as in April.

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