The latest Consumer Price Index (CPI) report, released Wednesday morning, showed housing costs remaining higher while the auto sector saw a bit of good news. Overall consumer inflation ticked lower on an annual basis during the month of August.
Yahoo Finance housing reporter Dani Romero and autos reporter Pras Subramanian join Morning Brief hosts Brad Smith and Seana Smith to discuss inflation in the shelter and auto sectors.
Data from the US Bureau of Labor Statistics showed that the shelter CPI index posted a 0.5% gain on an annual basis, compared to a 0.4% gain in July. During the month of August, owner's equivalent rent (OER), which is the hypothetical rent homeowners would earn renting out their property and rent, gained 0.4% month over month, down from 0.5% in July. Rent costs grew 0.5% month over month, up from 0.4% the month prior.
Unlike housing, the auto sector trended lower in August. Inflation on new car prices was flat for the month and down 1.2% year over year, while used car prices dropped 1% month over month, contributing to the 10.4% year-over-year decline.
August's inflation print coming in in line with expectations, with the core reading coming in just slightly hotter than expected on a month-over-month basis. We're taking a deeper dive into some specific sectors here. We're joined now by our housing reporter, Danny Romero, and senior autos reporter, Prass Subramanian. So, Danny, let's start with you and one of the stickiest segments of inflation. What are we seeing on the shelter front here?
Brad, it is no surprise that the shelter component remains one of the stickiest parts of the inflation picture. Shelter posted a .5% monthly gain in August. Now, on a yearly basis, shelter came in at a 5.2%. This figure is softening if we compare to when shelter peaked at 8.2% in March of last year. Now, remember, economists pay close attention to two significant factors, and that hold the biggest weight when it comes to the shelter index. That's owners' equivalent rent, OER. That's the hypothetical rent that you would earn if you were a homeowner renting out your property and rents, which lags real-time data because the government collects this every six months, which causes a lag in the index. OER came at a .5% gain in last month while rents came in at a .4% gain in August.
We certainly have heard Powell talk quite a bit about shelter and the stickiness there that we've seen over the last couple of months. Prass, let's turn to autos because that's been another focus here. I know you're closely tracking that, and it seems like the situation's improving out there, at least if you're in the market to buy a car.
Yeah, there's overall trend down lower, not sticky like housing. It's been really kind of reacting to what's happening in the market. So, so for new cars, we see flat for the month, but down 1.2% year over year. But for used cars, down 1% in a month and down 10.4% year over year. So, big move there for used cars. That's been, that shot up tremendously during the pandemic. Now it's been coming down, but still higher than when it was prior to the pandemic. So good news there for, for car buyers. There's a lot of inventory out there. Dealers have been incentivized people to buy these cars, so it's normalization there and good for consumers, not that sticky with regards to cars.
And so normalization, I mean, what does that spell out in terms of some of the larger trends in terms of the pricing that consumers are going to be looking across, especially as we've moved now, it seems, from the trove of, or wave of EV demand to now. Okay, maybe I can get that EV used, or maybe I can still get an ice engine, and still get a favorable price there. How is, how is that mix setting up right now?
Yeah, I think it's, it's pretty much a buyers market now, back to those old days where you go into a dealership and you can actually negotiate a deal. Uh, used cars in particular now, there's more supply coming online, off lease cars, things like that. But also in the new market, like you mentioned, there's tremendous deals for EVs, especially lease deals. Uh, a lot of supply out there. The 2025 models are coming out this fall. So we're going to see a lot more potential action there for consumers to negotiate a better deal.
Yeah, it certainly seems like there is a lot to like in this print beyond what we're seeing, even when it comes to vehicles when we see some improvements elsewhere. But, but Maddie, circling back to shelter, since it is so sticky, you mentioned the fact that this is going to take time to improve. Walk us through, I guess, what that could look like then, given the lagged effects that we likely will see, and how long this could potentially be an issue here in these prints.
That's the number one question is how long will it take, but policy advisors at the Bank of San Francisco, they released a note just last week saying that they're expecting shelter inflation to decline in the next few months, uh, which will put downward pressure on overall inflation. However, it's still uncertain how the magnitude and the pace of when we would really actually see that in the, in the shelter component specifically, Shauna.
All right, Danny, Prass, great stuff. Thanks so much for breaking that down for us.
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This post was written by Naomi Buchanan.