1. Inflation Watch
• Inflation (price change) is important for REALTORS®
because changes in prices in the economy can lead to shifts
in interest rate policy by the Federal Reserve Bank.
• During the current financial crisis, fears of deflation were
present in news reports (deflation can lead downward
spiral of prices that destroy an economy similar to what
happened in the Great Depression)
• While talk of deflation is less, some are fearing that
inflation in the coming years may lead to another
unpleasant economic condition called stagflation (high
unemployment and high inflation) that makes it difficult for
the central bank to combat inflation due fear of further job
market deterioration.
2. Inflation Watch November 30th,2010
• The consumer and producer price indices (CPI
and PPI) appear to be pretty tame in recent
months.
• Headline and core inflation is moderate,
underlying PPI Crude
• Oil prices are steady
• Gold, other metals and commodities are moving
up strongly.
• Dollar is weakening. A weaker dollar makes
imported goods more expensive and adds to
inflationary pressure
3. Indicator Source and definition Change from Change from Concern?
previous month previous year
Consumer Price Index BLS, Price change of consumer + 0.1% + 1.1% No
(CPI) goods and services
CPI Core BLS, CPI less food and energy + 0.1% + 0.7% No
CPI Housing (owners’ BLS, CPI housing component + 0.1% + 0.2% No
equivalent rent) (primary residence)
Producer Price Index BLS, Price changes domestic + 0.8% + 3.5% No
(PPI) producers receive for their
output
PPI Core BLS, PPI less food and energy ‐ 0.3% + 1.3% No
PPI Crude Materials BLS, PPI crude / raw materials + 0.6% + 13.0% Yes
PPI Residential BLS, PPI BRES + 0.4% + 3.9% Maybe
Construction
Gold WSJ, Price per ounce of gold + 3.0% + 23.4% Yes
West Texas Crude Oil WSJ, Price per barrel of oil + 2.7% + 7.8% Maybe
Dollar vs. Major FRB, Trade‐weighted value of + 0.6% + 0.5% Maybe
Currencies dollar vs. major currencies
Construction Cost Census, constant quality, new + 0.6% ‐ 0.5% No
Index single family homes under
construction
4. Looking at the CPI in More Depth
Indicator Change from previous Change from Concern?
month previous year
Consumer Price Index (CPI) + 0.2% + 1.2% No
Food at home Unchanged + 1.4% No
Meats, poultry, fish and eggs + 0.4% + 5.8% Yes
Housing fuels and utilities ‐ 1.0% + 1.0% No
Household furnishings & ‐ 0.3% ‐ 2.5% No
operations
Transportation (Gasoline) + 2.0% + 7.3% Yes
Medical care + 0.1% + 3.2% Maybe
Hospital and related services + 0.1% + 6.6% Yes
Education Unchanged + 3.8% Maybe
Water, sewer, and trash + 0.4% + 5.5% Maybe
collection services
Personal Computers and ‐ 0.6% ‐ 4.0% No
peripheral equipment
Wireless telephone services ‐ 0.3% ‐ 2.5% No
Televisions ‐ 1.2% ‐ 19.3% No
5. CPI‐U: All Items Less Food and Energy
% Change ‐ Ye ar to Ye ar SA, 1982‐ 84=100
CPI‐U: All Items
% Change ‐ Ye ar to Ye ar SA, 1982‐ 84=100
6
4
2
0
‐2
06 07 08 09 10
Source: Bureau of Labor Statistics 12/15/10
6. PPI: Crude Materials for Further Processing
% Change ‐ Ye ar to Ye ar SA, 1982=100
PPI: Finished Goods
% Change ‐ Ye ar to Ye ar SA, 1982=100
50
25
0
‐25
‐50
06 07 08 09 10
Source: Bureau of Labor Statistics 12/15/10
10. NAR Median Sales Price: Total Existing Homes, United States
2000=100
Houses under Construction: Fixed‐Weighted Price Index
2000=100
180
160
140
120
100
80
01 02 03 04 05 06 07 08 09 10
Sources: National Association of Realtors, Census Bureau 12/15/10
