Printer friendly version2nd Quarter 2006
REGION 9
Inflation
In future issues, we will develop a Durango Price Index to gauge inflation in the region. In this issue we examine inflation in Denver and Phoenix, the city specific inflation rates closest to Region 9. Note that Phoenix inflation rates were not reported until 2002 and all the data is semi-annual.
We also present the core rate of inflation; inflation with the more volatile food and energy sectors removed. Core inflation in Phoenix was not reported until 2003. Many consider the core rate of inflation to be a more accurate view of inflation as the energy and food sectors are highly susceptible to large and frequent variations in prices.
Figures 6 and 7 present the semi-annual inflation rates from the first half of 1996 to the first half of 2006. Table 6 demonstrates the annual inflation data for 2001 – 2006 (only the first half). As we can see Denver inflation and core inflation has been generally above US inflation, though since the statewide recession in 2002 –2003, it has generally been lower. Phoenix’s inflation has been generally lower.
Respondents to the Livingston Survey (at the Federal Reserve Bank of Philadelphia) believe that inflation will remain somewhat low, about 1.5% nationwide, over the next twelve months, fueled in part by the Federal Reserve’s continued hawkish attitude on inflation.
Table 7 is inflation for Western cities size B/C (50,000 – 1.5 mil), and includes all cities in BLS region 42. Given a number of differences in small cities, such as higher transportation costs, less competition, relatively limited supply of housing, prices in these areas experience higher inflation than the national average and our two comparable western cities of Denver and Phoenix.
With respect to inflation in the Region 9, given that all the cities are small (size D, less than 50,000), it reasonable to expect inflation to be running a little bit higher than in Denver and/or Phoenix. Higher transportation costs, which raise prices to all goods and services delivered to area, and faster housing price growth contribute to the higher inflation rate. A back of the envelope calculation shows that rental housing prices alone contribute roughly 0.05% to Durango’s average inflation rates above Denver’s average inflation.
To more directly estimate local inflation rates, we will be introducing the “Durango Price Index” (DPI) over the next quarter as an abbreviated consumer price index. We will provide a more depth discussion of the DPI in this upcoming issue.
All the data used in this study is readily available from the Bureau of Labor Statistics (www.bls.gov), the Bureau of Economic Analysis (www.bea.gov), and the Federal Reserve Bank of St. Louis’ FRED II database (research.stlouisfed.org/fred2/). As a service of Fort Lewis’ Office of Economic Analysis and Business Research to Region 9 all the raw data is available at soba.fortlewis.edu/econometer/ This data will be updated quarterly.
2Includes Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming.
