How the Current Economy Has Changed Consumer Behaviors

Since the economy began its downward spiral into recession in early 2008, we have seen changes in consumer behaviors and habits. Studies have shown that mindsets have shifted and that the current consumer is a very different person than the consumer of several years ago. Many marketing research services have begun to create their own surveys and reports to gain insight into this new consumer that we are dealing with today.

What most marketing research services begin with is an analysis of consumer behaviors – what are the top drivers of purchase decision making? Are people considering their purchase decisions with more thought to the future consequences? What are people buying more of? Less of? These questions and more can produce an effective study with meaningful results.

So far, various market research services have discovered that durability is a key propeller of consumers’ purchase decision making. This suggests that consumers are looking to the future and considering the long term implications to their current purchasing actions. It means that consumers believe the economic recession is here to stay, at least for a while. Consumers expect spending levels to remain at these reduced levels indefinitely, and they are making their decisions accordingly. A study that questioned consumers regarding their top reasons for buying a product produced the following results: the top three reasons for buying a product are 1) it is durable and will last for a long time; 2) the product will make the consumer’s life easier; and 3) it is something the consumer has always wanted to have.

In another study by a marketing research services company, questions deconstructed what purchases and experiences people miss the most since the economic downturn. The questions posed elicited four main responses: 1) 24 of respondents said they miss dining out in restaurants (including fast food restaurants); 2) 15 said they miss traveling and taking vacations; 3) 14 said they miss buying apparel (clothes and shoes) that they used to purchase; and 4) 10 said they miss the ability to buy something on a whim, and the freedom to buy whatever they want without having to worry about the future. Sentiments like these will likely lead to an increasing desire for these more luxury items and behaviors, and eventually will bring forth increased spending. It is uncertain when this increased spending will begin, but it is clear that it will happen eventually.

Market research services have pressed consumers for more information regarding their opinions of luxury goods. We’ve found that after consumers made attempts to forgo luxury items, they realized that it is not too difficult to go without these goods; many consumers say now that their current budgets reflect the fact that luxury items seem unnecessary to them now. Out of people who declared that they are on a permanently stricter budget with respect to luxury goods, 42 of them said the reason is because they no longer feel a need to have these luxury items.

In fact, the definition of luxury seems to have changed. In one market research services study, consumers declared that small splurges are now luxuries to them: they feel guilt over eating out (even if it’s inexpensive) or buying an item at full price. In the past, luxury items were more extravagant: expensive cars, high tech electronics, and fancy clothes. Consumers indicate that they, in fact, do not want to be associated with these big ticket displays of wealth.

The recession has brought about a fundamental shift in the way people view happiness. Consumers now say that the things they want most in life are not material, but emotional. People want to be happy and spend time with family and friends. One survey reveals that the top indicators of success (according to the consumers surveyed) are 1) being able to have dinner with family often; and 2) being able to exercise every day.

From these survey results and from the current state of the economy, it is clear that the current American consumer is very different now than he or she was several years ago. As the definition of luxury changes, producers must adapt their products and marketing strategies to fit the current spending conditions. In the next few months and years we will experience changes (some lasting, some temporary) in the market and economy. As these changes evolve, market research will be crucial to determining successful strategies for producers.

About the Author: Rachel Bonsignore is Associate Director of The Omnibus Company. The Omnibus Company, a division of Kelton Research, provides fast and accurate http://www.omnibus.com/ market research services and http://www.omnibus.com/ marketing research services to public relations and marketing professionals looking for newsworthy, actionable data.

Article Source: ActiveAuthors.com

Mobile Phone Shipments Rebound To Double-Digit Growth in Fourth Quarter, According to IDC

The worldwide mobile phone market grew 11.3% in the fourth quarter of 2009 (4Q09), ending five consecutive quarters of retrenchment. According to IDC's Worldwide Mobile Phone Tracker, vendors shipped 325.3 million units in 4Q09 compared to 292.4 million units in the fourth quarter of 2008. Vendors shipped a total of 1.13 billion units on a cumulative worldwide basis in 2009, down 5.2% from the 1.19 billion units shipped in 2008.

"The mobile phone market has rebounded in dramatic fashion," said Kevin Restivo, senior research analyst with IDC's Mobile Phone Tracker. "The Asia/Pacific region and the United States were primarily responsible for pushing the market back into growth territory. Overall, vendors offered a wide array of converged mobile devices (smartphones) and messaging devices in the seasonally strong fourth quarter, to take advantage of increased user demand."

"One area of the market that has consistently shown growth all year is the converged mobile device market," said Ramon Llamas, senior research analyst with IDC's Mobile Devices Technology and Trends team. "Consumer tastes for mobile phones have increasingly shifted from simple voice telephony to greater data usage, and both handset vendors and carriers have been eager to meet demand despite ongoing economic challenges. IDC believes that the converged mobile device market grew nearly 30% year over year, and that the market will continue to gain momentum as device selection increases and price decreases continue into 2010 and beyond."

Market Outlook

IDC anticipates that the worldwide mobile phone market will rebound in 2010. "In 2009, the mobile phone market, like many others, contracted due to economic pressures. But as the year progressed, demand for mobile phones increased each quarter while year-over-year declines progressively decreased," adds Llamas. "Economic recovery mixed with pent-up demand will create positive conditions for handset vendors in both developed and emerging markets in 2010. Meanwhile, key handset vendors expect to exceed their 2009 shipment levels with refreshed portfolios, leveraging interest in touchscreens, messaging devices, and converged mobile devices."

Regional Analysis

• In Asia/Pacific (excluding Japan), 2009 as a whole was relatively flat year on year, marked by a stronger preference for low-cost handsets in China and India as users substituted away from more expensive options under recessionary pressure. However, the Asia/Pacific market saw strong gains in 4Q09, reflecting a strong start to recovery. Touchscreen-enabled devices remained a hot segment of the market, helping to drive the demand for converged mobile devices across the region.

• The Western European handset market grew on both a year-over-year and sequential basis in 4Q09. LG Electronics and Samsung performed particularly well thanks to their collective strength in the traditional mobile phones segment while Apple, Nokia, and Research In Motion helped sustain growth in the converged mobile device market. On a full-year basis, however, shipments into the region still declined as the improved second-half performance was not enough to offset the declines in the first half. In CEMA (Central and Eastern Europe, Middle East, and Africa), vendors found pockets of improvement during 4Q09, but overall sales in the region were focused on entry-level handsets targeted at first-time users.

• The North American market finished 2009 relatively strong posting the second-highest regional growth after the Asia/Pacific region (excluding Japan). Converged mobile devices remained in high demand in the fourth quarter due to a combination of lower priced devices and rate plans as well as greater user and carrier interest. However, feature phones accounted for the majority of shipments last year despite an overall volume decrease on a year-over-year basis. In Canada, mobile phone shipment volumes were buoyed by the introduction of a new wireless network, which increased the demand for smartphones, particularly the Apple iPhone.

• The Latin American mobile phone market shrunk in the fourth quarter. However, the performance marked an improvement from the double-digit declines posted in previous quarters. Stronger Brazilian currency pushed prices for mobile phone imports lower, spurring greater demand. In Argentina, channel partners purchased additional product ahead of a new tax rate that came into effect in December. Finally, the popularity of pre-paid service options across the regions included more converged mobile devices, stoking greater demand from vendors.

Top Five Mobile Phone Vendors

Nokia ended the year with a strong fourth quarter performance. Shipments of 126.9 million in 4Q09 represented the company's highest quarterly total in two years (since 4Q07). The higher handset figures were boosted by improved smartphone sales. Nokia introduced a number of new smartphone models, including the X6, to various markets. When its handset shipment performance is measured on an annual basis, however, Nokia shipped fewer devices in 2009 than in each of the last two years.

Samsung bested its single quarter record in 3Q09 by shipping 68.8 million units in 4Q09. The company capitalized on growing interest in converged mobile devices with its Omnia2 while addressing end-user demand for touchscreen and quick-messaging devices within developed markets. In emerging markets, Samsung's attention to local market tastes and extended distribution channels helped build its presence. Despite its heady growth, the company fell further behind market leader Nokia while distancing itself ahead of LG Electronics.

LG Electronics followed last quarter's record-breaking shipment volume with a new record, reaching 33.9 million units in 4Q09. However, operating margins took a sharp drop from 8.4% in 3Q09 to 1.3% in 4Q09, reflecting average selling price declines, higher marketing expenses, and channel expansion within emerging markets. Still, the company continues to reap success from its popular enV and Cookie products while building its converged mobile device portfolio with the Android-powered GW620 and GW880 and Windows Mobile-powered GW820.

Sony Ericsson posted its sixth consecutive quarterly loss this month. However, the joint venture's gross margins rose to 23% from 15% on a year-over-year basis, thanks to sales of new higher-margin mobiles. The vendor's sales of 14.6 million handsets represented its highest shipment figure of the year thanks to the introduction of new models such as the Satio and Aino. It also announced the Xperia X10 and Vivaz models that the company says will be released later this year.

Motorola ended 2009 with mixed results. The company posted its 12th consecutive quarter of year-over-year shipment declines, but also reported its lowest year-over-year decline since the first half of 2008. Moreover, Motorola recorded an operating loss of $132 million, a reduction of nearly 80% from 4Q08 levels. In its first quarter, Motorola demonstrated how Android has become a key component of its product portfolio, shipping 2 million units worldwide. Its DROID and CLIQ/DEXT devices were shipped to more than 20 countries. It also recently announced the BACKFLIP, MOTOROI, MT710, and the XT800 models, which are slated for release later in the year.

Top Five Mobile Phone Vendors, Shipments, and Market Share, Q4 2009 (Units in Millions)

Vendor	4Q09 Shipment Volumes	4Q09 Market Share	4Q08 Shipment Volumes	4Q08 Market Share	4Q09/4Q08 Growth
1. Nokia	126.9	39.0%	113.1	38.7%	12.2%
2. Samsung	68.8	21.1%	52.8	18.1%	30.3%
3. LG	33.9	10.4%	25.7	8.8%	31.9%
4. Sony Ericsson	14.6	4.5%	24.2	8.3%	-39.7%
5. Motorola	12.0	3.7%	19.2	6.6%	-37.5%
Others	69.1	21.2%	57.4	19.6%	20.4%
Total	325.3	100.0%	292.4	100.0%	11.3%

Source: IDC Worldwide Quarterly Mobile Phone Tracker, January 28, 2009

Note: Vendor shipments are branded shipments and exclude OEM sales for all vendors.

Top Five Mobile Phone Vendors, Shipments, and Market Share, 2009 (Units in Millions)

Vendor	2009 Shipment Volumes	2009 Market Share	2008 Shipment Volumes	2008 Market Share	2009/2008 Growth
1. Nokia	431.8	38.3%	468.4	39.4%	-7.8%
2. Samsung	227.2	20.1%	196.6	16.5%	15.6%
3. LG	117.9	10.5%	100.8	8.5%	17.0%
4. Sony Ericsson	57.1	5.1%	96.6	8.1%	-40.9%
5. Motorola	55.2	4.9%	100.1	8.4%	-44.9%
Others	238.6	21.2%	227.6	19.1%	4.8%
Total	1,127.8	100.0%	1,190.1	100.0%	-5.2%

Source: IDC Worldwide Quarterly Mobile Phone Tracker, January 28, 2009

Note: Vendor shipments are branded shipments and exclude OEM sales for all vendors.

Mobile Phones – These small, battery-powered, voice-centric devices utilize operator-provided cellular/PCS air interfaces for voice communication. They are designed primarily, in both form factor and feature set, for a compelling mobile telephony experience, but may also include text-messaging capability. Mobile phones may include a headset jack for hands-free operation as well as a variety of features, such as personal information management, multimedia, games, or office applications. Mobile phones exist at all points along the form factor, price point, and feature set continua. Mobile phones that combine voice communications capabilities with pen or keypad handheld data features are tracked within the Converged Devices category.

For more information about IDC's Worldwide Quarterly Mobile Phone Tracker, please contact Kathy Nagamine at 650-350-6423 or knagamine@idc.com.

Contact

For more information, contact:

Kevin Restivo
krestivo@idc.com
416-673-2230

Latest Tests of Treadmills and Ellipticals Yield 14 Top Machines

Plus, how to decide which is right for your workout needs

After putting 48 machines to the test, Consumer Reports Health lists 14 recommended treadmills and ellipticals for a home workout, including five Best Buy choices which combine performance and value. The report is part of “Get Fit In 2010,” a do-it-yourself Web guide at www.ConsumerReportsHealth.org. The Web site includes new ratings of bathroom scales, fitness tips for a variety of workout styles, and low-cost ways to stay healthy in bad weather.

Top Treadmills: If you like to run or walk

Treadmills have long been the most popular home workout machines, commanding more than 50 percent of the market. They’re a great option if the workout of choice is running or walking. Running, after all, is the gold standard of cardiovascular exercise. Consumer Reports Health tested 29 treadmills, analyzing ease of use, ergonomics, exercise range, quality and durability of construction, safety and more.

In the nonfolding category, Consumer Reports Health recommends four machines, including one CR Best Buy, the AFG 13.0 AT for $1,800. It’s the best value of the bunch and comes with a variety of exercise programs. Other options in this category include the top-rated Precor 9.31, a powerful well-built model that scored well across the board at a price of $3,300. Nonfolding machines are usually more powerful with longer decks and tend to be higher priced.

The best folding treadmills save space and compare favorably with any treadmill. Consumer Reports Health recommends four machines and identifies the Sole F63 as a CR Best Buy at $1,000, a good price for a machine that tops out at 12 mph with a 13 percent incline. The top rated Bowflex 7-Series, priced at $1500, has a bright easy-to-read monitor display, and its 60-inch deck is as long as the deck of any nonfolding model’s, which makes it suitable for just about any runner.

Consumer Reports Health notes that some treadmills now come with a negative-incline option to simulate downhill running, which works different muscle groups. Other models offer adjustable cushioning. While not a CR Best Buy or Recommended model, the NordicTrack A2550 scored in the middle of the pack of the folding models; it allows users to alternate the feel of their workout from running on concrete to running on a padded track. Some treadmills come with gadgets such as an MP3 dock with speakers or a headphone jack. “It’s a good idea to try the machines out in a store and see how you like these features. Bottom line, if those bells and whistles entice you to work out more, they may be worth the expense,” said Nancy Metcalf, senior program editor, Consumer Reports Health.

One of the folding treadmills, the Best Fitness BFT1, earned a rating of Don’t Buy: Performance Problem because its incline feature malfunctioned on two of the three samples tested by Consumer Reports.

Top Ellipticals: For a good cardiovascular workout without the high impact of running

Elliptical exercisers have been gaining ground in the marketplace in recent years. Their motion provides a good cardiovascular workout, but without the high impact of running. Those with joint problems or individuals who are carrying a little extra weight might find that ellipticals are a good choice. Another benefit of ellipticals is the ability to crank up the resistance for strength training or reverse stride to work slightly different muscles.

Consumer Reports’ testers pedaled on 19 ellipticals, evaluating exercise range, ergonomics, construction, safety, and more, recommending six machines. Of those machines, three are Consumer Reports Best Buys: the Sole E35 at $1300 is the top rated of the three Best Buys, followed by the NordicTrack AudioStrider 990 for $900 and the LifeCore LC985VG for $1,000. The Sole has an adjustable incline, pedals with a changeable foot angle, and controls on the moving handgrips, while the NordicTrack is notable for its programs controlled by its heart-rate monitor and a ramp that can be adjusted electronically while working out, features usually found in more expensive models. The LifeCore has a dial control for adjusting resistance and selecting from multiple preset programs.

How to shop for the machine that’s right for you:

• Budget and midrange models can usually be found at Sears, Sports Authority, Walmart and other discount and sporting-goods chains. Shop at sporting-goods specialty stores for moderate to high-end models.
• Keep a close eye on dimensions. Exercisers will need extra space to safely get on and off a machine. When shopping for ellipticals, take close stock of the vertical space, especially if there are low ceilings, because exercisers will be elevated on the machine.
• The machine’s display should have easy-to-use controls and will show some combination of heart rate, calories burned, speed, resistance levels, and details such as time and distance.
• When it comes to warranties, look for one that provides two to three years of coverage on major moving parts and a year for labor. Surveys on the probability of failure and repair costs have shown that extended warranties are probably not a good deal.
• Pay attention to ergonomics and adjustability. When using an elliptical, there should never be discomfort in the knee or hip joints, and knees shouldn’t bump the frame or handgrips. See more detailed tips online at www.ConsumerReportsHealth.org.

Gartner Says China's Economic Stimulus Policies Will Drive $39 Billion in IT Spending Through 2013

Stimulus-Driven IT Spending in China Will Reach Its Highest Level in 2010

STAMFORD, Conn., January 28, 2010 — 

The multiple stimulus policies issued by China's central government when the worldwide economic crisis hit China's export trade will continue to drive the purchase and consumption of IT products and services, according to Gartner Inc. Economic stimulus policies will drive IT spending in China to $38.9 billion through 2013, offering a significant opportunity for IT providers.

"The Chinese government is seeking to counter the decline in its export trade by encouraging domestic demand, and it appears that it is succeeding,"said Oliver Xu, principalresearch analyst at Gartner. "We predict that stimulus-driven IT spending will reach its highest level in 2010, primarily because most stimulus policy measures and plans were finalized and executed in mid-2009."

The main stimulus policies issued by the Chinese government include:

1. A $583.9 billion (4 trillion yuan) package that addresses infrastructure and public facilities/organizations
2. The Ten Industries Revitalization Plan, which aims to help enterprises in particular industrial segments
3. Various smaller subsidy programs and tax reductions for consumers

Mr. Xu said that the most visible stimulus-related IT spending will occur within the transportation services and equipment, healthcare, and construction verticals, which are highly dependent on IT and invest in it aggressively.

Telecom is the most in-demand segment. Gartner expects stimulus policies will drive IT spending in telecom to reach $4.5 billion in 2010, and for the period form 2009 through 2013 IT spending in this segment will surpass $14.2 billion. Hardware is the second-largest segment, with spending from the stimulus policies to reach $4.1 billion in 2010, and for the five years of 2009 through 2013 hardware spending will total $13 billion.

"The Chinese government will continue executing on stimulus policies implemented in 2009, even though economic performance indexes for first three quarters of 2009 already indicate substantial signs of recovery, Mr. Xu said. "The Ten Industry Revitalization Plan seeks to further long-term goals while also having an immediate effect on China's economy."

IT vendors seeking to benefit from China's economic stimulus policies should primarily target IT users in the construction, transportation and healthcare verticals, while also targeting the industries covered by the Ten Industry Revitalization Plan, which focuses on restructuring businesses and upgrading their technology. Gartner recommended that vendors target the highest level of contacts in companies that benefit from stimulus policies, because enterprises that have benefited the most from the stimulus policies are largely state-owned central and local companies and organizations, which make centralized IT purchases.

Overseas-based IT vendors are advised to target the product and service areas in which local competitors cannot perform well. Although none of the policies issued by the Chinese government specifically indicate that local IT vendors should be favored in IT purchasing, such vendors might gain an advantage through their private connections.

"Hardware, software and IT services providers should track government policies to see how they affect purchasing decisions and adjust their go-to-market strategies accordingly, as the Chinese government will likely change its policies as the global economic downturn progresses," Mr. Xu said.

Additional information is available in the report "Emerging Market Analysis: China's Economic Stimulus Policies Will Drive $39 Billion in IT Spending Through 2013." The report is available on Gartner's website at http://www.gartner.com/resId=1274216.

Contact:


Christy Pettey
Gartner
+1 408 468 8312
christy.pettey@gartner.com

IDC Energy Insights Forecasts Market for Meter Data Management (MDM) to Grow by Almost 30% to Reach $869.1 Million by 2013

IDC Energy Insights Forecasts Market for Meter Data Management (MDM) to Grow by Almost 30% to Reach $869.1 Million by 2013

27 Jan 2010
New IDC Energy Insights Study Shows MDM Critical Technology for Energy Companies Implementing Advanced Metering Infrastructure (AMI)

FRAMINGHAM, MA, January 27, 2010 – The market for meter data management (MDM) is growing at a fast pace with the introduction of smart metering, a new study published by IDC Energy Insights reveals. IDC Energy Insights forecasts the North American market to grow at a CAGR of 29.4% from $239.9 million in 2008 to $869.1 million in 2013.

According to IDC Energy Insights’ new study, Vendor Assessment: Industry Short List for Meter Data Management – Getting to Scale(Document # EI221319), smart metering is delivering exponentially greater volumes of data that can be used to support a whole range of offerings to customers. At the same time, this wealth of data can be mined for operational and business intelligence. MDM is a must-have technology for energy companies implementing advanced metering infrastructure (AMI).

IDC Energy Insights' research shows that currently, large utilities make up over 80% of the market for MDM in North America. The average deal size for a small utility is from $150,000 to $250,000, while larger utilities can have MDM contracts of $2 million to $4 million.

"The new energy economy is driving utilities to adopt new ways of serving their customers," said Jill Feblowitz, practice director of IDC Energy Insights. "The introduction of new technology, such as AMI/smart metering, is also changing the way companies interact with their customers."

This report uses IDC Energy Insights' Short List methodology to evaluate the vendors supplying MDM applications to the utility market. This analysis is intended to help energy executives arrive at a short list of IT suppliers that best address the needs of the business. Vendors evaluated for this study include Aclara, Ecologic Analytics, eMeter, Hansen Technologies, Itron, and Oracle.

"Companies are just beginning to test the scale of large implementations, as smart metering goes system-wide," continued Feblowitz. "Our research shows that scalability is the most important criteria for assessing the MDM. Utilities want to be confident that when they scale up from pilot to system-wide implementation of smart metering, the MDM will be able to handle increased volumes of meter data and process it quickly."

Among the key findings of this study are the following:

• Vendor offerings of MDM have proven capable of uploading and cleaning large volumes of data from system-wide implementation of AMI. The jury is still out on how well the MDM can perform in supporting large-scale billing of time-based or other exotic rates.

• There are almost as many possible variations of data delivery as there are meter configurations and customer information systems (CISs). The amount of work performed by MDM and capacity required will depend on the rest of the smart metering technology stack – configurable meters, network bandwidth, and CIS capabilities. Utilities should select the MDM within the context of the stack.

The introduction of AMI provides a means to collect an unprecedented amount of data. IDC Energy Insights' research shows that smart meters can now collect and deliver interval data for the mass-market customer. Most systems are capable of capturing and transporting very small intervals – some systems report capabilities of collecting one-minute interval data. This data can be used to support applications such as traditional billing, time-of-use (TOU) billing, market transactions for deregulation markets, presentation of data to the customer for energy education, and outage detection and restoration analysis.

For additional information about this study, or to arrange a one-on-one briefing with an IDC Energy Insights analyst, please contact Sarah Murray at 781-794-3214 or sarahbethmurray@gmail.com. Reports are available to qualified members of the media; reporters should email sarahbethmurray@gmail.com. For information on purchasing reports, email info@idc-ei.com.

About IDC Energy Insights

IDC Energy Insights provides research-based advisory and consulting services focused on market and technology developments in the energy and utility industries. Staffed by senior analysts with decades of industry experience, IDC Energy Insights covers both the utility and oil & gas segments, providing independent, timely, and relevant analysis focused on key business and technology issues. IDC Energy Insights serves a diverse and growing global client base, including electric, gas and water utilities, IT suppliers, independent power producers, retail energy providers, oil and gas companies, equipment manufacturers, government agencies, financial institutions, and professional services firms. IDC is the premier global provider of market intelligence, advisory services, and events for the information technology market. IDC is a subsidiary of IDG, the world's leading technology, media, research, and events company. For more information, please visit www.idc-ei.com or email info@idc-ei.com.

Contact

For more information, contact:

Sandra Collins
scollins@idc.com
508-988-6746

Vigorous IT Transformation Amid Modest Economic Revival Drive APEJ Public Sector Spending in 2010, Says IDC Government Insights

27 Jan 2010

Singapore and Hong Kong – January 27, 2010 – Despite improvements in the economy, governments in the Asia/Pacific (excluding Japan) or APEJ region will continue to maintain spending in 2010 until recovery from the global recession is secured. They have put in place ambitious IT transformation plans and this is expected to revolutionize the marketplace radically. More insights are revealed in the report, “Asia/Pacific Public Sector 2010 Top 10 Predictions” (Doc #HK9694102S), which discusses the top 10 IT predictions for the public sector in the Asia/Pacific region for 2010.

"We expect a marketplace driven by the growth of next-generation telecommunications infrastructures and rising use of mobile services. Greater attention will be paid to cloud services and business analytics. There will also be a demand in emerging markets with notable geo-political interests to build intelligent sustainable cities," says Alex S. Kim, Director for IDC Government Insights Asia/Pacific.

Kim adds, "The notion of intelligent or smart cities has emerged as the next wave for attracting new investments and retaining the presence of foreign companies. This up-and-coming business model of the 'Trinity' represents a holistic interaction between the public sector, vendors and citizens — all three working in sync to make inroads for building a smarter and more sustainable world." (See Figure 1)

Figure 1

With the advent of economic stimulus monies, the healthcare vertical will be revolutionizing its services through increased consumer participation and standards interoperability. Kim continues, "We have observed the sector's upcoming plans and it will be moving toward an evidence-based practice of medicine in an increasingly connected environment". For the education vertical, 1:1 computing will characterize the sector's transformation strategy as it takes a step closer to reality through the mass availability of affordable mininotebooks and learning content.

To assist government organizations and the vendors that serve this market, IDC Government Insights Asia/Pacific annually identifies the top trends for the year that will heavily influence the direction and magnitude of IT investment, management, and technology evaluation. Highlights of this report include:

• The public sector's new business awareness — also known as "Wal-Mart" effect of keeping costs low and productivity high — requires a great demand for organizational agility. Governments today are running businesses themselves and have to manage government organizations like a business. They should take cues from the private sector to gain efficiency amid shrinking budgets.
• The new business needs of governments are creating widespread consolidation, integration, and interoperability of IT systems and infrastructure. In doing so, tools and concepts to reduce redundancy and improve standardization, such as service-oriented architecture (SOA), will enable governments to adopt standardized best practices and processes that best fit the requirements of their agencies and departments.
• Governments will be more receptive to exploring and assimilating new stakeholder/citizenry engagement models through platforms such as new media and the widespread proliferation of mobile devices applications.

For more information on obtaining this report “Asia/Pacific Public Sector 2010 Top 10 Predictions” (Doc #HK9694102S), please contact Jace Tang at +65-6829-7723 or jtang@idc.com.

To set up an interview with Alex S. Kim, please contact Lay-Fang Tan at lftan@idc.com.

On-Demand Webcast On "Public Sector Top 10 Predictions for 2010"

To find out more about IDC Government Insights Asia/Pacific's Public Sector Top 10 Predictions for 2010, please register at IDC’s Webcast Portal to listen to the Webcast presented by Alex S. Kim, Janet A. Chiew and Gerald J. Wang. The webcast will be available from 27 January 2010 to 28 February 2010. The viewing instructions are as follow:

1. Click here to go to the synopsis page of the Webcast.

2. Click on the "Go to Webcast Portal" tab at the bottom of the page.

3. Register yourself at the Webcast Portal page.

4. If you are successfully, you will be directed to a page with the link to the Webcast.

3. You can now view the Webcast.

About IDC Government Insights

IDC Government Insights is headquartered in the metropolitan Washington, D.C. area in Falls Church, Virginia, with additional offices worldwide. IDC Government Insights is uniquely qualified to track, analyze, and forecast government technology spending based on in-depth government budget and spending analysis globally. Expert analysts examine IT value based on government-defined key result areas; decipher policy and regulatory goals to identify game-changing government strategies and inform critical decision making; survey government decision-makers to determine effectiveness of IT vendors’ go-to-market strategies; along with government-centric metrics and rankings of suppliers’ effectiveness in addressing specific government business problems, all with absolute independence and transparency. IDC is the premier global provider of market intelligence, advisory services, and events for the information technology market. IDC is a subsidiary of IDG, the world’s leading technology, media, research, and events company. For more information, please visit www.idc-gi.com.

Contact

For more information, contact:

Lay-Fang Tan
lftan@idc.com
+65-6829-7731

You Are On camera

Did you know that wireless hidden cameras are possibly all around you? That’s right.

There are people using them in the park, in college classes, in malls, department stores, in meetings, and in many other places that you frequent. Individuals have their personal reasons as to why they use these hidden cameras in public places. You may even encounter these cameras when you walk into your neighbor’s home or the home of one of your family members. They are virtually everywhere.

Even businesses are in on using wireless cameras to catch thieves. What may look like a pen in the shirt pocket of the clerk may not be a regular ink pen. Then again, the tie that the manager is wearing may not be your usual tie.

There are many faces to these cameras and that’s because the idea behind them is for them not to be seen. It is important in certain environments to make sure individuals are acting the way they need to. In other words, they have to be fair and moral. Anyone who can’t be that way when they think they are by themselves has the potential to turn in a heartbeat in other situations.

However, these cameras are not just found in businesses and homes. They are found virtually anywhere and everywhere. You never know when the book that someone is reading in the park may actually have a hidden camera inside of it. That is how well disguised these cameras are.

So if you find yourself in a situation in which wireless hidden cameras could come in handy, go ahead and give it a try. You can start out with one or go ahead and go with many. There are so many different scenarios in which these cameras are needed that it would be almost impossible to go down the entire list. Just keep in mind that they are all around, so be sure to be on your best behavior.

US Consumer Price Index - December 2009

On a seasonally adjusted basis, the December Consumer Price Index for
All Urban Consumers (CPI-U) rose 0.1 percent, the U.S. Bureau of
Labor Statistics reported today. Over the last 12 months, the index
increased 2.7 percent before seasonal adjustment.

The seasonally adjusted increase in the all items index was broad
based, with the indexes for food, energy, and all items less food and
energy all posting modest increases. Within the latter group, a sharp
rise in the index for used cars and trucks was the largest
contributor to the 0.1 percent increase, while the indexes for
airline fares, apparel, and lodging away from home rose as well. In
contrast, the indexes for rent and owners' equivalent rent were
unchanged and the index for new vehicles declined.

Grocery store food indexes showed broad-based increases, leading to
the food index rising 0.2 percent, its largest one-month advance in
over a year. The energy index also rose 0.2 percent; this was its
smallest increase in five months. The indexes for fuel oil and
gasoline rose, but the electricity index was unchanged and the
natural gas index declined.


Table A. Percent changes in CPI for All Urban Consumers (CPI-U): U.S. city
average


Seasonally adjusted changes from
preceding month
Un-
adjusted
12-mos.
June July Aug. Sep. Oct. Nov. Dec. ended
2009 2009 2009 2009 2009 2009 2009 Dec.
2009

All items.................. .7 .0 .4 .2 .3 .4 .1 2.7
Food...................... .0 -.3 .1 -.1 .1 .1 .2 -.5
Food at home............. .0 -.5 .0 -.3 .0 .0 .3 -2.4
Food away from home (1).. .1 .1 .1 .1 .1 .2 .1 1.9
Energy.................... 7.4 -.4 4.6 .6 1.5 4.1 .2 18.2
Energy commodities....... 16.2 -.4 8.5 1.1 1.9 6.3 .5 46.5
Gasoline (all types).... 17.3 -.8 9.1 1.0 1.6 6.4 .2 53.5
Fuel oil................ 4.8 -1.5 6.2 1.5 6.3 9.0 1.1 6.5
Energy services.......... -1.2 -.3 .0 .1 .9 1.4 -.1 -5.4
Electricity............. -1.9 -.6 -.1 .6 .6 1.4 .0 -.5
Utility (piped) gas
service.............. 1.3 .9 .4 -1.7 1.9 1.5 -.7 -18.1
All items less food and
energy................. .2 .1 .1 .2 .2 .0 .1 1.8
Commodities less food and
energy commodities.... .3 .2 -.3 .3 .4 .2 .2 3.0
New vehicles............ .7 .5 -1.3 .4 1.6 .6 -.3 4.9
Used cars and trucks.... .9 .0 1.9 1.6 3.4 2.0 2.5 9.2
Apparel................. .7 .6 -.1 .1 -.4 -.3 .4 1.9
Medical care commodities .1 -.1 .5 .6 .2 .0 -.1 3.3
Services less energy
services.............. .1 .0 .2 .1 .1 .0 .1 1.4
Shelter................. .1 -.2 .1 .0 .0 -.2 .0 .3
Transportation services -.1 .5 .6 .7 .4 .6 .3 3.9
Medical care services... .2 .3 .2 .4 .2 .4 .2 3.4

1 Not seasonally adjusted.



Year in Review

For the 12 month period ending December 2009, the CPI-U rose 2.7
percent, compared to 0.1 percent for 2008. The larger increase was
primarily due to the energy index, which rose 18.2 percent during
2009 after falling 21.3 percent in 2008. The energy upturn was caused
by the gasoline index, which rose 53.5 percent in 2009 after
declining 43.1 percent in 2008. The household energy index, in
contrast, declined 4.9 percent during 2009 with the index for natural
gas falling 18.1 percent and the electricity index declining 0.5
percent. The food index, which rose 5.9 percent in 2008, fell 0.5
percent for the 12 months ending December 2009, the first December-to-
December decline since 1961. The index for food away from home rose
1.9 percent while the food at home index fell 2.4 percent. Within
food at home, all six major grocery food groups posted declines in
2009 after rising in 2008. The dairy and related products group
declined the most, falling 7.6 percent, its largest annual decline
since 1938.

The index for all items less food and energy rose 1.8 percent during
2009, the same increase as in 2008. This identical increase was the
result of offsetting factors. Pushing the index higher were vehicle
prices, which rose in 2009 after declining in 2008. The indexes for
new vehicles rose 4.9 percent in 2009 and the index for used cars and
trucks increased 9.2 percent. Additionally, the apparel index turned
up in 2009, rising 1.9 percent after declining in each of the
previous two years. The medical care index rose more rapidly in 2009,
increasing 3.4 percent after a 2.6 percent increase the previous
year, and the tobacco index increased 30.1 percent in 2009 after
rising 6.3 percent in 2008. Largely offsetting these accelerations
was the shelter index, which posted its smallest annual increase
since its inception in 1953. It increased only 0.3 percent after
increasing 1.9 percent in 2008, with the indexes for both rent and
owners' equivalent rent increasing 0.7 percent. Also, the indexes for
recreation and for household furnishings and operations both declined
in 2009 after rising in 2008.


Consumer Price Index Data for December 2009

Food

The food index rose 0.2 percent in December after rising 0.1 percent
in each of the previous two months. The food at home index increased
0.3 percent, its largest increase since October 2008. Among the major
grocery store food groups, the index for meats, poultry, fish, and
eggs was unchanged while the other five groups all posted increases.
The index for cereals and bakery products rose 0.6 percent, while the
dairy and related products index increased 0.5 percent after
declining 0.7 percent in November. The indexes for fruits and
vegetables and for other food at home both rose 0.3 percent while the
index for nonalcoholic beverages increased 0.2 percent. The index for
food away from home increased in December, rising 0.1 percent after
increasing 0.2 percent in November.

Energy

The energy index, which increased 4.1 percent in November, rose 0.2
percent in December. The index for energy commodities increased 0.5
percent, with the gasoline index rising 0.2 percent after increasing
6.4 percent in November. (Before seasonal adjustment, gasoline prices
declined 1.5 percent in December.) The index for household energy was
unchanged in December. The fuel oil index rose 1.1 percent after a
9.0 percent increase in the previous month, but the index for natural
gas fell 0.7 percent. The index for electricity, which increased 1.4
percent in November, was unchanged in December.



All items less food and energy

The index for all items less food and energy rose 0.1 percent in
December after being unchanged in November. The index for used cars
and trucks rose 2.5 percent in December, accounting for almost half
of the increase in the all items less food and energy index. The
index for airline fares also continued to rise, increasing 2.4
percent in December after advancing 3.8 percent in November. Also
increasing were the apparel index, which rose 0.4 percent, and the
medical care index, which rose 0.1 percent. The shelter index, which
declined 0.2 percent in November, was unchanged in December. The
indexes for rent and owners' equivalent rent were both unchanged
after declining in November, while the index for lodging away from
home rose 0.5 percent in December. The index for new vehicles
declined in December, falling 0.3 percent after increasing in each of
the previous three months. The recreation index also declined in
December, falling 0.4 percent as televisions, sporting goods and toys
were among many recreation components that posted declines.


Not seasonally adjusted CPI measures

The Consumer Price Index for All Urban Consumers (CPI-U) increased
2.7 percent over the last 12 months to an index level of 215.949
(1982-84=100). For the month, the index decreased 0.2 percent prior
to seasonal adjustment.

The Consumer Price Index for Urban Wage Earners and Clerical Workers
(CPI-W) increased 3.4 percent over the last 12 months to an index
level of 211.703 (1982-84=100). For the month, the index decreased
0.1 percent prior to seasonal adjustment.

The Chained Consumer Price Index for All Urban Consumers (C-CPI-U)
increased 2.8 percent over the last 12 months. For the month, the
index declined 0.2 percent on a not seasonally adjusted basis. Please
note that the indexes for the post-2007 period are subject to
revision.


The Consumer Price Index for January 2010 is scheduled to be released
on Friday, February 19, 2010, at 8:30 a.m. (EST).


Item Structure and publication changes for January 2010

Effective with the release of CPI data for January 2010 scheduled for
Friday, February 19, the BLS will introduce several item structure
and other publication changes into the CPI.

Shelter. The expenditure weight for second homes will be moved from
Lodging away from home to a new, unpriced stratum under the Owners'
equivalent rent expenditure class. As such, the expenditure class
index for Owners' equivalent rent will now include both primary and
secondary homes, and the title of that expenditure class index will
change from Owners' equivalent rent of primary residences to Owners'
equivalent rent of residences. Both the expenditure class (Owners'
equivalent rent of residences), and the Owners' equivalent rent of
primary residence stratum within it, will be published.

Current Structure
Lodging away from home
Housing at school, excluding board
Other lodging away from home including hotels and motels

Owners' equivalent rent of primary residence
Owners' equivalent rent of primary residence*

New Structure
Lodging away from home
Housing at school, excluding board
Other lodging away from home, including hotels and motels

Owners' equivalent rent of residences
Owners' equivalent rent of primary residence
Unsampled owners' equivalent rent of secondary residences*


Medical care commodities. The item structure for Medical care
commodities will change:

Current Structure
Medical care commodities
Prescription drugs
Prescription drugs
Unsampled rent or repair of medical equipment*
Nonprescription drugs and medical supplies
Internal and respiratory OTC drugs
Nonprescription medical equipment and supplies

New Structure
Medical Care Commodities
Medicinal drugs
Prescription drugs
Nonprescription drugs
Medical equipment and supplies
Medical equipment and supplies
Unsampled rent or repair of medical equipment*

Telephone services. The item structure for telephone services will
also change:

Current structure
Telephone services
Land-line telephone services, local charges
Land-line telephone services, long distance
Wireless telephone services

New structure
Telephone services
Wireless telephone services
Land-line telephone services

Indexes that are deemed continuous will have the same reference base
previously used. New index series will have a December 2009 = 100
reference base. Unpublished series are indicated with a *.

Other publication changes
The index for State and local registration and license will be
retitled State motor vehicle registration and license fees.

A new index for Intracity mass transit will be published. Indexes
for Land-line interstate toll calls and Land-line intrastate toll
calls will be discontinued.


Expenditure Weight Update

Effective with the release of the January 2010 CPI on February 19,
2010, the Bureau of Labor Statistics (BLS) will update the
consumption expenditure weights in the Consumer Price Index for All
Urban Consumers (CPI-U) and Consumer Price Index for Urban Wage
Earners and Clerical Workers (CPI-W) to the 2007-08 period. The
updated expenditure weights for these indexes will replace the 2005-
2006 weights that were introduced effective with the January 2008 CPI
release. As originally announced by BLS in December 1998, CPI
expenditure weights will continue to be updated at two-year
intervals.


Facilities for Sensory Impaired

Information from this release will be made available to sensory
impaired individuals upon request. Voice phone: 202-691-5200,
Federal Relay Services: 1-800-877-8339.


Brief Explanation of the CPI

The Consumer Price Index (CPI) is a measure of the average change in
prices over time of goods and services purchased by households. The
Bureau of Labor Statistics publishes CPIs for two population groups:
(1) the CPI for Urban Wage Earners and Clerical Workers (CPI-W),
which covers households of wage earners and clerical workers that
comprise approximately 32 percent of the total population and (2) the
CPI for All Urban Consumers (CPI-U) and the Chained CPI for All Urban
Consumers (C-CPI-U), which cover approximately 87 percent of the
total population and include in addition to wage earners and clerical
worker households, groups such as professional, managerial, and
technical workers, the self-employed, short-term workers, the
unemployed, and retirees and others not in the labor force.

The CPIs are based on prices of food, clothing, shelter, and fuels,
transportation fares, charges for doctors' and dentists' services,
drugs, and other goods and services that people buy for day-to-day
living. Prices are collected each month in 87 urban areas across the
country from about 4,000 housing units and approximately 25,000
retail establishments-department stores, supermarkets, hospitals,
filling stations, and other types of stores and service
establishments. All taxes directly associated with the purchase and
use of items are included in the index. Prices of fuels and a few
other items are obtained every month in all 87 locations. Prices of
most other commodities and services are collected every month in the
three largest geographic areas and every other month in other areas.
Prices of most goods and services are obtained by personal visits or
telephone calls of the Bureau's trained representatives.

In calculating the index, price changes for the various items in each
location are averaged together with weights, which represent their
importance in the spending of the appropriate population group.
Local data are then combined to obtain a U.S. city average. For the
CPI-U and CPI-W separate indexes are also published by size of city,
by region of the country, for cross-classifications of regions and
population-size classes, and for 27 local areas. Area indexes do not
measure differences in the level of prices among cities; they only
measure the average change in prices for each area since the base
period. For the C-CPI-U data are issued only at the national level.
It is important to note that the CPI-U and CPI-W are considered final
when released, but the C-CPI-U is issued in preliminary form and
subject to two annual revisions.

The index measures price change from a designed reference date. For
the CPI-U and the CPI-W the reference base is 1982-84 equals 100.0.
The reference base for the C-CPI-U is December 1999 equals 100. An
increase of 16.5 percent from the reference base, for example, is
shown as 116.5. This change can also be expressed in dollars as
follows: the price of a base period market basket of goods and
services in the CPI has risen from $10 in 1982-84 to $11.65.

For further details visit the CPI home page on the Internet at
http://www.bls.gov/cpi/ or contact our CPI Information and Analysis
Section on (202) 691-7000.


Note on Sampling Error in the Consumer Price Index

The CPI is a statistical estimate that is subject to sampling error
because it is based upon a sample of retail prices and not the
complete universe of all prices. BLS calculates and publishes
estimates of the 1-month, 2-month, 6-month and 12-month percent
change standard errors annually, for the CPI-U. These standard error
estimates can be used to construct confidence intervals for
hypothesis testing. For example, the estimated standard error of the
1 month percent change is 0.04 percent for the U.S. All Items
Consumer Price Index. This means that if we repeatedly sample from
the universe of all retail prices using the same methodology, and
estimate a percentage change for each sample, then 95% of these
estimates would be within 0.08 percent of the 1 month percentage
change based on all retail prices. For example, for a 1-month change
of 0.2 percent in the All Items CPI for All Urban Consumers, we are
95 percent confident that the actual percent change based on all
retail prices would fall between 0.12 and 0.28 percent. For the
latest data, including information on how to use the estimates of
standard error, see "Variance Estimates for Price Changes in the
Consumer Price Index, January-December 2008". These data are
available on the CPI home page (http://www.bls.gov/cpi), or by using
the following link http://www.bls.gov/cpi/cpivar2008.pdf


Calculating Index Changes

Movements of the indexes from one month to another are usually
expressed as percent changes rather than changes in index points,
because index point changes are affected by the level of the index in
relation to its base period while percent changes are not. The
example below illustrates the computation of index point and percent
changes.

Percent changes for 3-month and 6-month periods are expressed as
annual rates and are computed according to the standard formula for
compound growth rates. These data indicate what the percent change
would be if the current rate were maintained for a 12-month period.

Index Point Change

CPI
202.416
Less previous index
201.800
Equals index point change
.616

Percent Change

Index point difference
.616
Divided by the previous index
201.800
Equals
0.003
Results multiplied by one hundred
0.003x100
Equals percent change
0.3



Regions Defined

The states in the four regions shown in Tables 3 and 6 are listed
below.

The Northeast--Connecticut, Maine, Massachusetts, New Hampshire, New
York, New Jersey, Pennsylvania, Rhode Island, and Vermont.
The Midwest--Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota,
Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin.
The South--Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky,
Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South
Carolina, Tennessee, Texas, Virginia, West Virginia, and the District
of Columbia.
The West--Alaska, Arizona, California, Colorado, Hawaii, Idaho,
Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming.


A Note on Seasonally Adjusted and Unadjusted Data

Because price data are used for different purposes by different
groups, the Bureau of Labor Statistics publishes seasonally adjusted
as well as unadjusted changes each month.

For analyzing general price trends in the economy, seasonally
adjusted changes are usually preferred since they eliminate the
effect of changes that normally occur at the same time and in about
the same magnitude every year--such as price movements resulting from
changing climatic conditions, production cycles, model changeovers,
holidays, and sales.

The unadjusted data are of primary interest to consumers concerned
about the prices they actually pay. Unadjusted data also are used
extensively for escalation purposes. Many collective bargaining
contract agreements and pension plans, for example, tie compensation
changes to the Consumer Price Index before adjustment for seasonal
variation.

Seasonal factors used in computing the seasonally adjusted indexes
are derived by the X-12-ARIMA Seasonal Adjustment Method. Seasonally
adjusted indexes and seasonal factors are computed annually. Each
year, the last 5 years of seasonally adjusted data are revised. Data
from January 2004 through December 2008 were replaced in January
2009. Exceptions to the usual revision schedule were: the updated
seasonal data at the end of 1977 replaced data from 1967 through
1977; and, in January 2002, dependently seasonally adjusted series
were revised for January 1987-December 2001 as a result of a change
in the aggregation weights for dependently adjusted series. For
further information, please see "Aggregation of Dependently Adjusted
Seasonally Adjusted Series," in the October 2001 issue of the CPI
Detailed Report.

The seasonal movement of all items and 54 other aggregations is
derived by combining the seasonal movement of 73 selected components.
Each year the seasonal status of every series is reevaluated based
upon certain statistical criteria. If any of the 73 components
change their seasonal adjustment status from seasonally adjusted to
not seasonally adjusted, not seasonally adjusted data will be used in
the aggregation of the dependent series for the last 5 years, but the
seasonally adjusted indexes will be used before that period. Note:
47 of the 73 components are seasonally adjusted for 2009.

Seasonally adjusted data, including the all items index levels, are
subject to revision for up to five years after their original
release. For this reason, BLS advises against the use of these data
in escalation agreements.

Effective with the calculation of the seasonal factors for 1990, the
Bureau of Labor Statistics has used an enhanced seasonal adjustment
procedure called Intervention Analysis Seasonal Adjustment for some
CPI series. Intervention Analysis Seasonal Adjustment allows for
better estimates of seasonally adjusted data. Extreme values and/or
sharp movements which might distort the seasonal pattern are
estimated and removed from the data prior to calculation of seasonal
factors. Beginning with the calculation of seasonal factors for
1996, X-12-ARIMA software was used for Intervention Analysis Seasonal
Adjustment.

For the seasonal factors introduced in January 2009, BLS adjusted 29
series using Intervention Analysis Seasonal Adjustment, including
selected food and beverage items, motor fuels, electricity and
vehicles. For example, this procedure was used for the Motor fuel
series to offset the effects of events such as damage to oil
refineries from Hurricane Katrina.

For a complete list of Intervention Analysis Seasonal Adjustment
series and explanations, please refer to the article "Intervention
Analysis Seasonal Adjustment", located on our website at
http://www.bls.gov/cpi/cpisapage.htm.

For additional information on seasonal adjustment in the CPI, please
write to the Bureau of Labor Statistics, Division of Consumer Prices
and Price Indexes, Washington, DC 20212 or contact Jeff Wilson at
(202) 691-6968, or by e-mail at Wilson.Jeff@bls.gov. If you have
general questions about the CPI, please call our information staff at
(202) 691-7000.


Recalculated Seasonally Adjusted Indexes to be Available on February
17, 2010

Each year with the release of the January CPI, seasonal adjustment
factors are recalculated to reflect price movements from the just-
completed calendar year. This routine annual recalculation may result
in revisions to seasonally adjusted indexes for the previous 5 years.
BLS will make available recalculated seasonally adjusted indexes, as
well as recalculated seasonal adjustment factors, for the period
January 2005 through December 2009, on Wednesday, February 17, 2010.
This date is two working days before the scheduled release of the
January 2010 CPI on Friday, February 19, 2010.

Consumer Price Index

Why is the consumer price index (or CPI) so important? Well, it is a quick way of determining how much more or less people are spending on a day-to-day basis, and from this figure we can determine the kinds of pressures that the economy is under

If the CPI number rises, it means that the average household or consumer has less money for discretionary spending.

Longer term, it means that wages will come under pressure as employees find that they are living on less, and will then either request higher pays, or look for employment opportunities elsewhere.

The vicious circle

Employers too, will find that the costs of running their business will go up. Higher operating costs, mean lower profit margins and lower margins mean that they will have less capacity to meet the higher wage demands employees are now requiring.

Higher costs equal lower profits, and that means lower share prices. To avoid posting lower profits, businesses must then consider passing these higher costs to their customers, which of course will trickle down to CPI numbers. Potentially a cycle could occur where higher prices cause higher costs and higher prices again.

So we can see why world central banks keep such a close eye on the rate of inflation.

Winners and losers

Some businesses may benefit from a CPI rise. They can use this as justification for putting up prices either by more than the CPI or pass on price rises that have not been affected by CPI, thus increasing their profit margins.

For example, a services industry may pass on a 5% price rise, whereas the cost of running their business may have only increased by 1-2%.

It is also important to note that even if the overall number does increase it may be that several of the 11 categories have actually fallen, but that the rises in the other sectors has been sufficient to cause an overall rise. A rise in alcohol and tobacco and healthcare is not going to have any affect on an individual, non-smoking, teetotaler with good health.

What does a higher CPI figure mean to my stocks?

The impact of CPI figures will vary from stock to stock and, probably more importantly, industry to industry. A services industry might have little exposure to CPI based values, whereas a manufacturer is likely to be more exposed, and therefore their profitability and share price can be influenced by a change in these figures.

It is often the unexpected numbers that have the biggest influence on the market. If the market expects a 1% rise and the actual figure turns out to be, say, 3% this is more likely to have an adverse affect. Most economic data has already been factored in before its release, but anything that greatly varies from that expectation is going to have a greater impact.

So we can see that it's not just the figure or percentage, but rather the variation away from the expectation that will cause a share price to rise or fall.

To summarise, the market does not like unexpectedly high rates of inflation as this causes uncertainty to companies profit outlooks. The inflation however will affect each industry in different ways.

How is it calculated?

CPI by definition is the measurement of the price change in a basket of consumer goods. The actual goods within this basket are divided into 11 categories:

alcohol and tobacco
clothing and footwear
housing
household furnishings
supplies and services
health
transportation
communication
recreation
education and
miscellaneous

CPI is simply the measurement of change in the overall cost of these items. If the original basket had a value of 100 and this quarter's costs have risen to 102 we'll see a CPI rise of 2%. The increase in CPI is called inflation. Very simple

By: www.fingala.com