.#Housing starts came in at 1.314M in Oct., just short of consensus, but displayed solid gains in both single- and multi-family subcomponents. Further, building permits increased to 1.46M, so the housing sector appears to be benefitting from more accommodative #rate levels.
While a strong #housing sector is a clear positive for #economic growth, it holds a more complex influence on #inflation, as significant supply of new apartments, and impressive completions in 2018 and so far in 2019, appear to be weighing on actual and implied rent price levels.
Interestingly, there seems to be some divergence in the strength of #rental prices by size of city, with major urban centers (Los Angeles, New York, San Francisco, and Chicago) witnessing slowing owners-equivalent-rent growth (OER), while smaller cities hold up.
Still, overall rental vacancy rates remain low and year-over-year OER #CPI growth appears solid, although given the importance of this component to #inflation overall, we’ll be keeping a close eye on it in the months to come.
As long as actual and implied rates of rental price growth hold up, we think #CPI inflation should firm somewhat in the months ahead and think valuations and technical factors continue to make #TIPS breakevens look attractive at current levels.
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