Despite the subdued nature of US CPI, some large components are turning up.  Owners’ equivalent rent and rent of primary residence, which together account almost of a third of the CPI basket, are turning up strongly.  A low vacancy rate and a relatively resilient US economy is helping to drive rents higher, with eg San Francisco seeing the greatest rent increases, at 6.4% over the last year, and with many other cities, such as Nashville, Seattle, Denver and Houston, all seeing increases of over 4.5%.

Furthermore, our leading indicator for US Shelter CPI, which includes apartment vacancy rates and the growth in the working-age population among its inputs, shows that the trend should continue.  Higher rents are a strong support for headline CPI in the US.

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Source: Variant Perception, Bloomberg and Macrobond