Inflation Still Under Control

The low rate of inflation gives the Federal Reserve the room to maintain its expansionary monetary policy and to keep mortgage rates low. This is good news in the landscape industry, as home owners may still be able to afford landscape improvements.

The seasonally adjusted monthly Consumer Price Index (CPI) was down in June for the third consecutive month, falling 0.1 percent following a decline of 0.2 percent in May, but up 1.1 percent from a year earlier. Meanwhile, core inflation - excluding food and energy prices - rose a modest 0.9 percent from a year earlier.

For the past year, the rental component of the CPI has been essentially flat. In June it was down 0.1 percent from a year earlier. Homeownership prices - measured by using an owner's equivalent rent, which is largely driven by the rent index without utilities - has also been drifting down, declining 0.3 percent over the past year.

The rent and owner components of the CPI make up 31 percent of the CPI. The soft rental market and excess vacancies have kept rents from rising, which has been a challenge to apartment owners who have seen other costs increase. It also has made it more difficult for multifamily projects to obtain financing.

The June Producer Price Index for finished goods also fell for the third month in a row, down 0.5 percent after declining by 0.3 percent in May. Nonetheless, the June reading was up 2.8 percent from a year earlier. Weakness in construction contributed to a 0.7 percent drop in June for overall building materials prices for both single-family and multifamily construction, their first decrease in eight months.

However, they were still up 3.9 percent and 3.5 percent, respectively, from a year earlier. Major contributors to June's price decline were falling lumber, energy and copper prices.

- Courtesy of NAHB