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Latest CPI Insights Point to Investor Gains Amid Rising Rent Trends

The Labor Department announced on Wednesday that the headline Consumer Price Index (CPI) increased by 0.2% in July, which was in line with forecasts. Year-over-year, inflation climbed to 2.9%, representing the first reading below 3% since 2021.

This encouraging information followed yesterday’s report on the producer price index (PPI), which indicated the smallest year-over-year price increase since March. These findings come after a weaker-than-anticipated reading in June, potentially setting the stage for a more accommodative monetary policy in the near future.

Although the CPI data is viewed as encouraging to some, the bottom line is that consumers are still leaving the grocery stores with empty wallets. Regarding this, Bill Adams, chief economist at Comerica Bank, comments on how people are impacted by it all: “Consumers are still mad about inflation, which most people measure by comparing prices today with where we remember them being ‘not that long ago. If inflation continues to trend more normally, consumers will become used to higher price levels and frustration over inflation will fade.”

But will the frustration really fade? It may, if American citizens are able to make more money to compensate, but that’s not likely.

Related Article: Social Security’s Buying Power Diminishes Amid Inflation Crisis Leading Individuals to Buy Cash Flowing Properties

Included in the mix were shelter stats, which were less encouraging for the masses. However, numbers were viewed in a positive light for those in the real estate sector who would benefit from rising rental rates.

Report Shows Rent Climbing Which Increases Investor Profits

In July, the costs of various items such as vehicles, apparel, and certain food products, further declined. Additionally, prices for several services that had significantly contributed to recent inflation, such as airfare, also decreased. However, some categories continue to pose challenges, particularly housing and auto insurance, which remain persistently high, especially shelter stats that saw a 0.4% climb in owners’ equivalent rent and a 0.5% increase in the rent of primary residences.

Housing costs represent the largest financial burden for many families and have significantly contributed to inflation in recent years. While economists and leading officials from the Federal Reserve have anticipated a decrease in prices, they remain surprisingly resistant to change.

Igor Popov, Chief Economist at Apartment List comments on the shelter aspect of the report: “So by the time the shelter component makes it all the way back down to where it was pre-pandemic, it will have kind of the final check mark. But until then, we’re expecting it to slowly continue to catch up to the market, and that seems to be what it’s been doing for many months.”

Not all inflation is considered problematic because some industries flourish amid rising prices, especially real estate investors. This holds true mostly because as rents rise, an investor’s ROI increases, too. In addition to this, as property values rise, investors benefit from increased equity.

Related Article: Why Rental Properties are a Safe Investment During Times of High Inflation

CPI Data’s Impact on the Market and Fed Rate Cut Expectations

Investors Benefit from Increased Rental Rates During High Inflation

There was a sense of relative stability in equity markets during the pre-market trading hours, as investors waited for the upcoming release. The previous day saw all three major indexes make gains following a more favorable than expected PPI report. The Dow Jones Industrial Average (DJIA) surged by approximately 400 points, while the Nasdaq Composite (NDX) and S&P 500 (SPX) recorded increases of 2.4% and 1.7%. This coincided with a decline in the yield on the 10-year Treasury, which fell to 3.853%.

Related Article: Why Investing in Rental Real Estate VS Stocks is a Smart Strategy

According to economists, the combination of easing inflation and a declining labor market suggests that Federal Reserve officials may initiate interest rate cuts during their upcoming policy meeting in September. Such a move would lower borrowing expenses and provide support to the economy. “In short, this CPI report represents more good data and adds to the evidence supporting a [0.25 percentage point] September rate cut,” Paul Ashworth, chief North American economist at Capital Economics stated.

Although some state that the report “represents more good data,” it’s not predictable which way the wind will blow the economy in the coming months, especially with talks of an upcoming new pandemic.

Related Article: The Shockwave of Inflation: Credit Card Debt Out of Control Amid Surging Prices

Protect Yourself From the Economy by Reaping the Benefits of Rental Income

With inflation and the economy, in general, being so unstable, it would be wise to start protecting your wealth and your hard-earned money by investing in assets that have been proven to stand their ground. Assets not connected to the volatile economy, Wall Street, or the government are the safest and most lucrative investments that not only help protect and build wealth, but also allow individuals to save for retirement.

For those who would like to secure their wealth in rental real estate, Morris Invest can make it happen for you. Our professional team can help you add a new construction rental to your investment portfolio. If your interest has been sparked, don’t hesitate to give our team a call to discuss your goals or hear about our new multi-family and single-family rentals available in lucrative locations.

 

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