Smeal College of Business

Penn State/ACY Alternative Inflation Index shows continued increase in inflation

UNIVERSITY PARK, Pa. — The latest Penn State/ACY Alternative Inflation Index analysis shows that the inflation rate for December 2019 was 3.2 percent. This continues the trend of accelerating inflation rate from September 2019.

The index is the result of collaboration among three researchers: Brent Ambrose, Jason and Julie Borrelli Faculty Chair in Real Estate and director of the Institute for Real Estate Studies at Penn State; Jiro Yoshida, associate professor of business at Smeal; and, N. Edward Coulson, professor of economics and director of the Center for Real Estate at the University of California Irvine’s Paul Merage School of Business.

The Bureau of Labor Statistics (BLS) reported that the year-over-year change in the Consumer Price Index (CPI) was 2.3 percent, also up from the previous month’s 2.05 percent.

The primary factor driving the difference in these two measures of inflation rates is the Penn State/ACY Marginal Rent inflation rate. The annual marginal rent inflation rate was 6.2 percent in December, up from November’s rate of 5.64 percent. In contrast, the Bureau of Economic Analysis Personal Consumption Expenditure Rent and BLS Rent indexes increased 3.4 percent and 3.3 percent, respectively.

The uptick in the ACY CPI inflation rate suggests that the Federal Reserve’s recent interest rate cuts have had the desired effect of stimulating the economy. The continuing upward pressure from rental increases suggests that the Federal Reserve may need to begin thinking about raising interest rates.

Last Updated February 12, 2020