Thursday, May 18, 2006

Rents a Key Driver of Inflation

The L.A. Times reports:
Like an uninvited drunken uncle, higher consumer inflation crashed the economy's growth party Wednesday. But it wasn't just higher energy prices that caused concern.

Rising rents and higher prices for a wide variety of consumer goods, including prescription drugs, swimsuits and school books, were key factors behind a higher-than-expected 0.6% increase in consumer prices in April.

The inflation news, reported by the Labor Department, sparked a stock market sell-off amid fears that it would lead to higher interest rates and an economic slowdown.

Higher rents in particular were worrisome, accounting for nearly half the surprisingly high 0.3% increase in the core consumer price index, which excludes energy and food costs. Rents have been increasing as many people are priced out of the sky-high home purchase market.
A problem in areas where they restrict apartment buildings.