During 2014, the US Consumer Price Index (CPI) increased by only 0.8 per cent. Recent figures released by the Bureau of Labor Statistics indicated that it went down by 0.4 percent in December.
Much of the December decrease has been attributed to falling energy prices, but the cost of fuel oil has fallen recently too.
Natural gas and electricity prices both increased last month, although natural gas prices still have not caught up to last year’s levels. Electricity costs more for customers in the residential, industrial and commercial sectors.
The low inflation rates benefit commercial property owners by helping to keep operating costs down.
Lower energy costs are a direct benefit, since they lead to lower heating and cooling costs in commercial holdings. Lower inflation also puts less upward pressure on wages, which benefits all businesses.
Low inflation does not do as much to keep rents down, since this is more about supply and demand. Since the recession ended, demand for retail space has largely been down, which means landlords have not been able to collect higher rents. Inflation hasn’t had much influence over the situation.
Low inflation, focused mainly for products that consumers use regularly, is driving consumer sentiment up, and this momentum will benefit retail properties directly and other commercial retail property types indirectly.
Preliminary Reuters/University of Michigan consumer sentiment index for January was 98.2, up from 93.6 in December, and a much larger increase than expected. Low gas prices are getting a lot of credit for the increase in confidence.
