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Inflation

Description: 

In order to accurately assess economic progress, economic measures must be adjusted for inflation. Companies consider inflation in determining wage and salary adjustments and Social Security payments are adjusted annually based on the consumer price index. In addition, companies and individuals widely use measures of inflation in contractual matters.

The most common measures of national inflation are the consumer price index (CPI), produced monthly, and the gross domestic product implicit price deflator (GDP deflator), produced quarterly. The two measures are calculated in very different ways; sometimes the inflation rate calculated from the two indexes differs appreciably.

For Arizona, a state-specific implicit price deflator can be calculated annually from the state’s nominal and real dollar gross domestic product. The only consumer price index available for Arizona is the index for Metropolitan Phoenix, which is produced just twice a year.

The year-over-year percent changes in the monthly/quarterly national inflation measures are displayed on Arizona Indicators for the last five or six years. The annual averages from each of these inflation measures, for the nation and for Arizona, also are displayed.

Data Source: 

The GDP deflator is available from the U.S. Department of Commerce, Bureau of Economic Analysis: http://www.bea.gov/regional/index.htm and the national GDP deflator http://www.bea.gov/national/index.htm. Click on the “Interactive Tables: GDP and the National Income and Product Account (NIPA) Historical Tables” link; the GDP deflator is in Table 1.1.9 (Section 1: Domestic Product and Income). The preliminary quarterly data are available about one month after the end of a quarter. The implicit price deflator for Arizona can be calculated from the current and real dollar figures at http://www.bea.gov/regional/index.htm, available about six months after the end of a calendar year.

The consumer price index for the nation and for Metro Phoenix is produced by the U.S. Department of Labor, Bureau of Labor Statistics: http://www.bls.gov/cpi/. The monthly data are released about three weeks after the end of the month. The Metro Phoenix figures are available in July and January.

Data Quality Comments: 

The GDP deflator is subject to revision. The CPI is based on a sample of prices.

The method used to calculate the Arizona GDP implicit price deflator (the current dollar figure divided by the real dollar figure) is not the same as used to calculate the national GDP implicit price deflator.

iconInflation in the United States, Year-Over-Year Percent Change

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Visualization Notes:

As measured by the gross domestic product implicit price deflator (GDP deflator), the year-over-year inflation rate nationally gradually slowed from a peak rate of 3.5 percent in mid-2006, during the last economic boom, to only 0.2 percent in late 2009, just after the end of the last recession. As the economy recovered, the inflation rate bounced back to 2.2 percent in third quarter 2011, but the rate has since dropped back; it was 1.0 percent in second quarter, 2015. In contrast, the inflation rate measured by the consumer price index (CPI) has been more volatile, in part due to the swings experienced in gasoline prices. Year-to-year inflation peaked at 3.9 percent in September 2011; the year-over-year change was 0.1 percent in June 2015.

iconInflation in the United States, Percent Change

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Visualization Notes:

Both high inflation and deflation (negative inflation) are indicators of an unsound economy. Low inflation (an annual rate of approximately 1-to-3 percent) generally is considered to be the target. Over the last two decades, the inflation rate in most years has been between 2 and 3 percent. The rate typically peaks at the end of an economic expansion and hits its low point at the end of a recession.

Based on both the consumer price index and the gross domestic product implicit price deflator, inflation was at a cyclical low in 2009. Inflation climbed through 2011, but has since dropped back. In 2014, it was 1.4 percent based on the GDP deflator and 1.6 percent based on the CPI.

iconInflation Measured by the Gross Domestic Product Implicit Price Deflator, Percent Change

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Visualization Notes:

Generally, the inflation rate does not vary substantially by state or local area. Compared to the nation, inflation measured by the gross domestic product implicit price deflator for Arizona generally has been less than the national average since the late 1990s. Inflation peaked in 2005 and 2006, nationally and in Arizona, then slowed with the economic recession. It has been only slightly higher in recent years. In 2013, the rate was 1.6 percent nationally and in Arizona.

iconInflation Measured by the Consumer Price Index, Percent Change

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Visualization Notes:

Generally, the inflation rate does not vary substantially by state or local area. In only two of the 12 years since the consumer price index began to be reported for Metropolitan Phoenix has inflation in the Phoenix area been more than the national average. Over this period, Phoenix area inflation was highest in 2007, at the peak of the economic cycle, and in 2008, due to rising gasoline prices. Deflation was measured in 2009 as gas prices fell and the recession had a generalized effect of holding prices steady. Inflation was minimal in 2010, rose to between 2 and 3 percent in both 2011 and 2012, then dropped back to 1.3 percent in 2013. Nationally and in Phoenix, inflation in 2014 was 1.6 percent.

Data Source

The GDP deflator is available from the U.S. Department of Commerce, Bureau of Economic Analysis: http://www.bea.gov/regional/index.htm and the national GDP deflator http://www.bea.gov/national/index.htm. Click on the “Interactive Tables: GDP and the National Income and Product Account (NIPA) Historical Tables” link; the GDP deflator is in Table 1.1.9 (Section 1: Domestic Product and Income). The preliminary quarterly data are available about one month after the end of a quarter. The implicit price deflator for Arizona can be calculated from the current and real dollar figures at http://www.bea.gov/regional/index.htm, available about six months after the end of a calendar year.

The consumer price index for the nation and for Metro Phoenix is produced by the U.S. Department of Labor, Bureau of Labor Statistics: http://www.bls.gov/cpi/. The monthly data are released about three weeks after the end of the month. The Metro Phoenix figures are available in July and January.