Penn State/ACY Alternative Inflation Index reveals decline in inflation rate

June 08, 2020

UNIVERSITY PARK, Pa. — The June 2020 release of the Penn State/ACY Inflation index suggests that the United States annual inflation rate continued to decelerate, dropping to 1.46% for April 2020 from the March rate of 2.53%.

The overall decline in inflation continues the trend observed last month of a general drop in energy and other prices. However, this month the Penn State/ACY Marginal Rent inflation rate also saw a decline to 6.06% for April, down from the March rate of 6.19%.  

The Penn State/ACY Core Personal Consumption Expenditure (PCE) Inflation Rate for April also declined from 2.19% to 1.56% and is now below the Federal Reserve’s 2% target rate. In comparison, the Bureau of Labor Statistics (BLS) also reported that the April year-over-year change in the BLS Consumer Price Index declined to 0.38% and the Bureau of Economic Analysis (BEA) Core PCE inflation rate stood at 1.04%, both down considerably from the March rates.

“The COVID-19 pandemic continues to hammer the U.S. and global economies. The observed declines in inflation now reflect the effects of government-ordered shutdowns and social distancing measures that began in mid-March,” said Brent Ambrose, Jason and Julie Borrelli Faculty Chair in Real Estate and director of the Institute for Real Estate Studies at Penn State.

“The downturn in the Penn State/ACY Marginal Rent series now reflects the declining multifamily transaction volume and anticipated falling rent collections in April. However, significant uncertainty continues to surround future rental rates as it is unclear how government policies designed to protect households from evictions and mortgage foreclosures will affect the ability of landlords to respond to market pressures.” 

The Penn State/ACY Alternative Inflation Index is the result of collaboration among three researchers: Ambrose; 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.

Based on Ambrose, Coulson, and Yoshida (2018), the rental inflation rate reported by the ACY Marginal Rent Index is much higher and more volatile than the BLS CPI Rent Index.  With unemployment rising and economic activity stalling due to government mandated social distancing measures, significant uncertainty exists regarding future inflation. Additional uncertainty also comes as states begin to reopen economies.

(Media Contacts)

Last Updated August 07, 2020