Housing Costs Inflating Core Inflation

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Housing Costs Inflating Core Inflation

Source: Bloomberg, Unigestion, as of 11 November 2021.

Inflation remains at the forefront of investors’ concerns as it continues to push higher. In the US, recent CPI numbers released for October came out stronger-than-expected (yet again): headline inflation jumped by 6.2% year-over-year, the highest rate since December 1990, while core CPI surged by 4.6%, more than twice the Fed’s long-term target of 2%.

The latter is particularly alarming as the forces at play in this core measure are less volatile, stickier, and will consequently take longer to resorb than the headline measure, driven by cyclical elements such as energy prices. Housing, the biggest component of core inflation measures – and the largest expenditure for most average citizens – once again posted an above average rise in October, highlighting that the trend remains strong and durable.

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