The WSJ's Nick Timiraos wrote on the weekend about the puzzle around rent inflation, which is one-third of the CPI. It's stuck at 5.6% y/y and keeping overall inflation high.
That number comes from a survey of 7000 tenants and synthesizes what a homeowner would pay to rent their own home. It is primarily shaped by "continuing leases" signed many months earlier, while the same units are only surveyed every six months. Adding a lag into the component is that rental extension agreements are typically signed 2-3 months in advance.
All this adds to the confusion about rental inflation. Most think it’s just a matter of time before lower rents impact inflation, but some worry that surprisingly-high demand and solid wage growth will keep rents high.
Most-convincing is this chart: Which highlights that the CPI rent number is currently higher than any of the private measures of rent.
The April CPI report is due on Wednesday and the consensus is at +0.3% m/m on the headline and core.
