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/national/nipaweb/SelectTable.asp?Selected=Y (Table 1.1.9). 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/gsp/, 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.
Inflation in the United States, Year-Over-Year Percent Change
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 0.5 percent in late 2009, just after the end of the last recession. As the economy recovered, the inflation rate bounced back to 2.4 percent, though the rate at year-end 2011 was 2.1 percent. In contrast, the inflation rate measured by the consumer price index (CPI) has been much more volatile. The spike in CPI inflation to more than 5 percent during 2008 and the deflation of 2 percent measured during 2009 largely result from the sharp swings experienced in gasoline prices. The rise in CPI inflation in early 2011 also was related to gas prices. After peaking at 3.9 percent in September 2011, the year-over-year increase was down to 2.9 percent in February 2012.
Inflation in the United States, Percent Change
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.
Through 2001 nationally, the consumer price index consistently registered higher inflation than the gross domestic product implicit price deflator. After several years of comparable inflation, the CPI measured higher inflation than the GDP deflator in 2008 due to rising gasoline prices, but this was offset in 2009. The CPI registered higher inflation than the GDP deflator in 2010 and 2011; inflation has accelerated since the 2009 recessionary low.
Inflation Measured by the Gross Domestic Product Implicit Price Deflator, Percent Change
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.
Inflation Measured by the Consumer Price Index, Percent Change
Visualization Notes:
Generally, the inflation rate does not vary substantially by state or local area. In all but one year since the consumer price index began to be reported for Metropolitan Phoenix, inflation in the Phoenix area has been less than the national average. Inflation was highest 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.
Data Source
The GDP deflator is available from the U.S. Department of Commerce, Bureau of Economic Analysis: http://www.bea.gov/national/nipaweb/SelectTable.asp?Selected=Y (Table 1.1.9). 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/gsp/, 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.
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