Real income provides a realistic picture of changes in residents’ purchasing power over time by adjusting the nominal personal income in each period for the change in price levels. For a discussion of how the Consumer Price Index (CPI) is used to adjust for changes in price levels, please refer to the chart on this subject.

Boston’s CPI is used to adjust growth in real personal income in New England. In recent years, the Boston area has experienced lower inflation than the rest of the United States. However, there have been periods, not long ago, during which the Boston area experienced higher inflation than the rest of the U.S. Consequently, while nominal figures show positive growth in the region’s personal income between 2002 and 2003, real income in New England actually fell during this period. This decrease in New Englanders’ real income, however, was not as severe as the decrease experienced during the recession of the early 1990s. After 2005, New England experienced significant growth in real personal income, surpassing the national growth rate in most quarters. However, real personal income growth in New England was consistently lower than the national growth rate for every quarter of 2008.