Weekly Market Insight . Consumer Price Index; % Change Y/Y, All Urban Consumers . 4/25/11

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Consumer Price Index
% Change Y/Y, All Urban Consumers
April 25, 2011
bobsbox_110425.jpgSource: U.S. Bureau of Labor Statistics, Grubb & Ellis Core inflation, which excludes food and energy, remained subdued last month, rising just 0.1 percent compared with February. The headline number surged by 0.5 percent for a second consecutive month, pushed higher by prices for food (+0.8 percent) and energy (+3.5 percent). On a year-over-year basis, inflation remained tame: a low 1.2 percent for core inflation and 2.7 percent for total inflation, as illustrated in the graph. The Federal Reserve does not view inflation as a near-term problem, believing that gas prices will recede after the summer driving season. They also see that emerging markets such as China, India and Brazil are putting the brakes on growth in order to subdue their domestic inflation problems, which could keep inflation from spreading to the U.S. And they continue to cite high unemployment and low wage growth as restraints against inflation. But U.S. consumers already are feeling the pain at the gas station and the grocery store, as are manufacturers who face higher costs for raw materials and shipping. Inflation can rise quickly as it did twice in the 1970s and early 1980s. These outbreaks were caused by the 1973-74 Arab oil embargo and policy mistakes by the U.S. government. It took three recessions in less than a decade before inflation was subdued. Today, inflation remains low, but there is concern that it could spread beyond food, energy and raw materials into the broader economy within two or three years. Regions that specialize in these commodities, including the tier of states from Texas northward to the Dakotas, could see above-average income and employment gains over the next few years and thus present some interesting opportunities for commercial real estate investors.
Robert Bach, Senior Vice President, Chief Economist, has 30 years of professional experience in real estate market research, consulting and city planning. His commentary on the real estate markets is provided here on a weekly basis.

Need more information? Contact:

Robert Bach
Senior Vice President, Chief Economist
312.698.6754

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About CRE Northwest

Specialist in office & investment real estate in Seattle & the Eastside
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