Another upward force on American inflation: the housing boom

FROM ENERGYCPICPICPI and used cars to wages and shipping, the list of factors pushing up American inflation is growing fast. Could housing be next? According to figures published on October 13th, the consumer-price index () rose by 5.4% in the year to September. Its shelter component increased by 3.2%, up from 2.8% in the year to August. And it has further to run.Shelter has the biggest weight in the , making up 32% of the basket of goods and services used to construct the index. The component is broken into two main buckets: regular rents paid by tenants, and the imputed cost of living in owned homes. Although house prices rose by 20% in the year to July, they do not feed directly into the . That is because statisticians treat home purchases as investment rather than consumption. Instead they capture homeownership by estimating “owners’ equivalent rent”, the amount an owned property could collect based on leased ones nearby. The rental market, therefore, is what drives shelter inflation.