Inflation (price change) is important for REALTORS® because changes in prices in the economy can lead to shifts in interest rate policy by the Federal Reserve Bank.

1. Inflation Watch
• Inflation (price change) is important for REALTORS®
because changes in prices in the economy can lead to shifts
in interest rate policy by the Federal Reserve Bank.
• During the current financial crisis, fears of deflation were
present in news reports (deflation can lead downward
spiral of prices that destroy an economy similar to what
happened in the Great Depression)
• While talk of deflation is less, some are fearing that
inflation in the coming years may lead to another
unpleasant economic condition called stagflation (high
unemployment and high inflation) that makes it difficult for
the central bank to combat inflation due fear of further job
market deterioration.

2. Inflation Watch November 30th,2010
• The consumer and producer price indices (CPI
and PPI) appear to be pretty tame in recent
months.
• Headline and core inflation is moderate,
underlying PPI Crude
• Oil prices are steady
• Gold, other metals and commodities are moving
up strongly.
• Dollar is weakening. A weaker dollar makes
imported goods more expensive and adds to
inflationary pressure

3. Indicator Source and definition Change from
previous month
Change from
previous year
Concern?
Consumer Price Index
(CPI)
BLS, Price change of consumer
goods and services
+ 0.2% + 1.2% No
CPI Core BLS, CPI less food and energy unchanged + 0.6% No
CPI Housing (owners’
equivalent rent)
BLS, CPI housing component
(primary residence)
+ 0.1% unchanged No
Producer Price Index
(PPI)
BLS, Price changes domestic
producers receive for their
output
+ 0.4% + 4.3% No
PPI Core BLS, PPI less food and energy - 0.6% + 1.4% No
PPI Crude Materials BLS, PPI crude / raw materials + 4.3% + 17.1% Yes
PPI Residential
Construction
BLS, PPI BRES + 0.4 + 4.2% Maybe
Gold WSJ, Price per ounce of gold + 5.0% + 27.5% Yes
West Texas Crude Oil WSJ, Price per barrel of oil - 8.8% + 8.0% Maybe
Dollar vs. Major
Currencies
FRB, Trade-weighted value of
dollar vs. major currencies
- 3.5% - 0.6% Maybe
Construction Cost
Index
Census, constant quality, new
single family homes under
construction
+ 0.6% - 0.5% No

4. Looking at the CPI in More Depth
Indicator Change from previous
month
Change from
previous year
Concern?
Consumer Price Index (CPI) + 0.2% + 1.2% No
Food at home Unchanged + 1.4% No
Meats, poultry, fish and eggs + 0.6% + 5.7 Yes
Housing fuels and utilities + 0.4% + 2.4% No
Household furnishings &
operation
Unchanged - 2.5% No
Transportation (Gasoline) + 4.6% + 9.5% Yes
Medical care + 0.2% + 3.6% Maybe
Hospital and related services + 0.5% + 7.5% Yes
Education Unchanged + 3.7% Maybe
Water, sewer, and trash
collection services
+ 0.2% + 5.3% Maybe
Personal Computers and
peripheral equipment
- 0.2% - 3.6% No
Wireless telephone services - 0.4% - 3.4% No
Televisions - 1.5% - 18.8% No

5. CPI-U: All Items Less Food and Energy
% Change - Year to Year SA, 1982-84=100
CPI-U: All Items
% Change - Year to Year SA, 1982-84=100
1009080706
Source: Bureau of Labor Statistics 11/29/10
6
4
2
0
-2

6. PPI: Crude Materials for Further Processing
% Change - Year to Year SA, 1982=100
PPI: Finished Goods
% Change - Year to Year SA, 1982=100
1009080706
Source: Bureau of Labor Statistics 11/29/10
50
25
0
-25
-50

7. Cash Price: Gold Bullion, London Commodity Price, PM Fix
US$/troy Oz
1009080706
Source: Wall Street Journal 11/29/10
1400
1200
1000
800
600
400

8. Domestic Spot Oil Price: West Texas Intermediate
$/Barrel
1009080706
Source: Wall Street Journal 11/29/10
140
120
100
80
60
40
20

9. Nominal Trade-Weighted Exch Value of US$ vs Major Currencies
Mar-73=100
1009080706
Source: Federal Reserve Board 11/29/10
88
84
80
76
72
68

10. NAR Median Sales Price: Total Existing Homes, United States
2000=100
Houses under Construction: Fixed-Weighted Price Index
2000=100
0403020100
Sources: National Association of Realtors, Census Bureau 11/29/10
150
140
130
120
110
100
90
150
140
130
120
110
100
90