Posted by: Josh Lehner | February 20, 2014

Inflation, 2013

The latest inflation data for Oregon is now available, covering the second half of 2013. One interesting item to note is that while U.S. inflation remains very low (and falling), the Portland-Salem numbers picked up to end the year. The gap between the local and national figures is about as large as it has ever been. Oregon inflation closely follows national trends over the extended horizon, however these quirks and different movements do happen from time to time. Part of the reason is that local inflation exhibits some pro-cyclical movements, as does the state’s economy. That is, Oregon tends to grow more quickly than the average state in expansions and fall further in recessions. Moving forward, expectations are for these two series to converge again in terms of the longer run trajectories. Another potential reason for the diverge is simply small sample sizes for the local data relative to the nation, making our underlying series more volatile.

CoreInflation13h2

What follows are updates to our standard inflation graphs including a look at the underlying components of inflation (with updated weights!). This first set of graphs are for the CPI-U which covers all urban consumers — about 88% of the U.S. population.

CPIU_13h2

Without further detailed information (which is not available) it is unknown precisely which portions are driving the divergence between Oregon and U.S. inflation figures. However at the larger component level, it is clearly Transportation (mostly car prices and gas prices), Food & Beverage (both at home and out to eat), Education & Communication (mostly tuition and home phone/internet prices) and Recreation (cable tv, admissions/fees, gyms). Another key factor is rising housing prices (both to buy and rent), which account for about 40 percent of the overall CPI, and are increasing faster in Oregon than nationwide.

CPIU_13h2graphsThis second set of graphs is for the CPI-W which covers urban wage earners — those households who earn half of income from wages and work mostly full-time, this is about 29% of the U.S. population.

CPIW_13h2

CPI-W does not differ dramatically from CPI-U. They measure the same products for prices, but the relative weights between components is different due to different consumption patterns. As such, the broader trends shown above in CPI-U are evident in the CPI-W data as well.

CPIw_13h2graphs


Responses

  1. Nice charts.

    It’s quite remarkable that overall U.S. inflation has been well behaved — at close to 2% per year — for the past 20 years now.

    • Thanks David. It really is. While the business cycle clearly has not been tamed, inflation seems to be, by and large. Central Banks have learned to choke it off and adjust expectations, so far anyway.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Categories

%d bloggers like this: