MW Did rents really surge in April and boost inflation? Here's the real story.

By Jeffry Bartash

The rising shelter costs are actually slowing. Unfortunately, other prices are rising again.

Are rents rising rapidly again? Not really.

An increase in inflation in April wasn't quite as bad as it looked if a quirky rise in rents is set aside, but it's hard to take much solace in the latest snapshot of consumer-price trends.

The U.S. inflation rate jumped to a three-year high of 3.8% last month, the latest government figures showed, largely because of a spike in oil prices (CL00) tied to the Iran war.

Oil wasn't the only culprit; the other was a big increase in rents and housing prices, the single biggest expense for most people. Shelter costs posted the largest increase in 27 months.

The rise in housing costs pushed up the so-called core rate of inflation by 0.4% in April, instead of 0.3% as Wall Street had expected, contributing to a decline in the stock market SPX Tuesday.

The core rate omits food and energy prices, and is viewed by the Federal Reserve as a more accurate predictor of future inflation.

Did rents and home prices really rise that much? Not really. Perhaps half of the increase stemmed from a statistical snafu tied to last year's lengthy government shutdown.

When the Bureau of Labor Statistic was closed last October, economists could not collect timely price information on shelter costs. So the agency assumed costs were unchanged in that month - a highly unlikely scenario.

The technical reasons why the BLS took that approach were justified, private-sector economists say, but it led to the cost of shelter being underestimated for the last six months.

The agency updated its methodology in the April CPI - and just as Wall Street economists had predicted, the result was a sharp increase in shelter costs for the month. Rents registered the biggest increase since July 2024.

The cost of rent is not really on the upswing, however.

"The jump was expected due to a quirk from the government shutdown," noted Thomas Simons, chief U.S. economist at Jefferies.

Economists say future CPI reports should show smaller increases in rents now that the statistical problems with the BLS shutdown-related fix are largely resolved.

Other rent-price trackers tell a more accurate story. The Zillow (Z) rent index, for example, shows rents rising at the slowest pace since 2015 if the pandemic is omitted - just 1.8% in the past year.

Yet even if the increase in shelter costs last month are set aside, inflation has proven to be quite sticky. It's not going to slow much until the Iran war ends.

The biggest source of inflation is in services such as car repair, travel, medical care and airline tickets, among other things.

Service prices minus energy and housing - a better proxy for broad U.S. inflation trends - rose at a 3.3% yearly pace in April, keeping them well above prepandemic levels of around 2.3%.

Bank of America economists said service inflation was "too hot," even if housing is excluded.

-Jeffry Bartash

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

May 12, 2026 13:15 ET (17:15 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.