The latest data from the Bureau of Labor Statistics (BLS) indicates a surprisingly low increase in Owner's Equivalent Rent (OER) for September, recording just 0.13% compared to 0.38% in the preceding month. This subdued rise in OER, which is a key component of inflation metrics, profoundly influenced the overall Consumer Price Index (CPI) and its core measures. Despite this, the overall CPI still climbed by 0.31% month-over-month, translating to a 3.8% annualized rate, marking it as one of the higher inflation figures observed since January.
Digging deeper into the figures, the core CPI, which excludes volatile food and energy prices, showed a modest increase of 0.23%, annualizing to 2.8%. This helped to slow down the year-over-year core inflation rate to 3.0%. The impact of the anomalous OER data was particularly evident in the core services CPI, where OER accounts for a substantial 44% weighting. Thanks to the unusually low OER increase, the core services CPI only advanced by 0.24% in September, equivalent to a 2.9% annualized rate.
This particular month's inflation data underscores the significant influence of OER on broader inflation indicators. Without this exceptional behavior from OER, the inflation readings, especially in core metrics, would have been considerably higher. It highlights how a single component can mask underlying inflationary pressures and reshape the narrative around the current economic environment.