What is inflation?

Inflation is the gradual decrease in the value of currency because of an expansion of the money supply or a rise in the cost of goods. Any dollar amount can be expressed in one of two ways:

The nominal amount is the sticker price or the cost of the item at the time of purchase. For instance, a dozen eggs purchased for $4.99 in 2017 has a nominal value of $4.99.
The real, or inflation-adjusted, amount is the cost of the item as expressed in dollars from a specific year. For instance, that dozen eggs has a real value of $6.22 in 2023 dollars, meaning that in 2017, spending $4.99 felt the same as spending $6.22 did in 2023.

Inflation is the main reason why a gallon of milk no longer costs 20 cents and bubble gum now costs a quarter instead of a nickel. The quarter you spend today has roughly the same worth as a nickel did in 1974. Inflation is a key aspect of the modern monetary system, and when you look at financial data over time, it is important to adjust for inflation to net out its effects.

How does Metopio handle inflation?

Metopio inflation-adjusts all dollar denominated data (including custom data that you upload, if you choose "Dollars" as the format) to the most recent year on an annual basis. The inflation multipliers we use are from the Bureau of Labor Statistics' CPI inflation calculator, using June-to-June measurements. This is based on the Consumer Price Index for all urban consumers (CPI-U), which is the broadest and most-used CPI, covering the typical expenditures of 93% of Americans. Inflation adjustments are usually performed in the fall of each year. If you would like the nominal (non-adjusted) values, or adjusted for inflation to another year, see the instructions below, or reach out to us here.

Why does Metopio adjust all dollars for inflation?

Adjusting for inflation is important because it shifts our view from the nominal dollar amount at the time to the actual value of those dollars, or what they can purchase. The median earnings for workers over time is a good example of why this matters. In the nominal terms, earnings rose consistently over the ten years from 2005-2015, excepting only the year of the financial crisis (first graph).

However, after we adjust for inflation, we see that the purchasing power of workers' earnings actually steadily declined (second graph).As we use Metopio to tell the story of our communities and the challenges they face, it's crucial that our data reflect their actual experiences. Using constant dollars also makes it easier to understand the relative value of money by looking at what earnings from the past could purchase in today's economy.

How can I remove or change the inflation adjustment?

The process is simple:

Determine the current year used for inflation adjustment in Metopio: click the (i) symbol for any topic, and the technical notes will say something like "Shown in inflation-adjusted 2023 dollars". (Remember that only dollar-denominated topics are inflation-adjusted.)
Use the BLS' inflation calculator to convert the value given for 2023 to any other year. For consistency, use June-to-June measurements.

Example: the median household income in Chicago in 2015, according to Metopio, was $64,824 (in 2023-adjusted dollars). In the inflation calculator, $64,824 in June 2023 has the same buying power as $50,701 in June 2015. Sure enough, if you look this up on the Census' website (where dollars are inflation-adjusted to the year they are reported), the median household income in Chicago in 2015 was $50,702. (The $1 difference is due to rounding.) Using this method, you can always undo or change our inflation-adjusted values.

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