Penn State/ACY Alternative Inflation Index shows slight rise in U.S. inflation

September 23, 2020

UNIVERSITY PARK, Pa. — The September 2020 release of the Penn State/ACY CPI Index indicates that the United States annual inflation rate for July 2020 was 1.04%, up slightly from the June rate of 0.9%.

The small uptick in the Penn State/ACY CPI Index indicates that overall inflation in the U.S. remains low following the general decline in inflation that began in March 2020. For July 2020, the Penn State/ACY Marginal Rent inflation rate was 2.41%, down from the June rate of 3%. To put this in perspective, the July 2019 Penn State/ACY Marginal Rent inflation rate was 5.46%. 

The Penn State/ACY Alternative Inflation Index is constructed by replacing the rental price of both tenant- and owner-occupied housing with a new measure, Marginal Rent Index (MRI), which was introduced by researchers Brent Ambrose, Edward Coulson, and Jiro Yoshida in 2018. The Penn State/ACY Index has been released to the public each month since its introduction in July 2018.

The Penn State/ACY Core Personal Consumption Expenditure (PCE) Inflation Rate for July increased slightly from 1.06% to 1.14%, well below the Federal Reserve’s 2% target rate. In comparison, the Bureau of Labor Statistics (BLS) also reported that the June year-over-year change in the BLS Core CPI edged up to 1.566% and the Bureau of Economic Analysis (BEA) Core PCE inflation rate stood at 1.255%.

The observed differences in the overall inflation rates and the marginal rent rates reflect the continued uncertainties caused by the COVID-19 pandemic. The stabilization of inflation over the summer reflects the reopening of much of the economy in late spring and the accompanying surge in economic activity.

“The slight uptick in overall inflation rates may suggest that government economic stimulus programs have started to create inflation pressure. However, the downward trend in the Penn State/ACY Marginal Rent series continues to reflect declines in multifamily transaction volume and falling rent collections,” Yoshida said.

“Furthermore, significant uncertainty continues to surround the direction of future rental rates as government policies designed to protect households from evictions and mortgage foreclosures are set to expire in September," according to Yoshida.

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.

The Penn State/ACY Alternative Inflation Index is the result of collaboration among three researchers: Ambrose, Smeal professor of risk management and real estate and director of the Institute for Real Estate Studies; Yoshida, Smeal associate professor of business; and Coulson, professor of economics and director of the Center for Real Estate at the University of California Irvine’s Paul Merage School of Business.

(Media Contacts)

Last Updated September 24, 2020