Why Are the CPI and the PCE Giving Different Estimates of Inflation?
In January 2012, the Federal Open Market Committee announced that its long-run objective for inflation was 2 percent as measured by the Personal Consumption Expenditures price index. At the time, the PCE appeared to be moving toward this target. But since then, PCE-based measures have drifted down. Toward the end of 2011, the year-over-year change in the PCE was close to 3 percent, but by March, when the PCE fell 0.1 percent, the 12-month percent change in the index had fallen to just under 1 percent. This has prompted some FOMC participants to suggest recently that the Committee may need to act to address this disinflation.
Urban Decline in Rust-Belt Cities
Many Rust-Belt cities have seen almost half their populations move from inside the city borders to the surrounding suburbs and elsewhere since the 1970s. As populations shifted, neighborhoods changed—in their average income, educational profile, and housing prices. But the shift did not happen in every neighborhood at the same rate. Recent research has uncovered some of the patterns characterizing the process.
The Delayed Recovery of Investment in Nonresidential Structures
Business fixed investment remains below its pre-recession peak, mainly due to the delayed recovery of one of its components, investment in nonresidential structures (factories, office buildings, etc.). One reason for the slow recovery is the overhang of structures that had been built before the recession.