What are deflators and when are they used in IMPLAN?
The purchasing power of a dollar changes over time (typically decreasing) due to inflation, a cyclical phenomenon by which prices of goods and services increase, which spurs workers to demand higher wages, which in turn increases demand for goods and services, thereby spurring additional price increases, and so on. Due to inflation, a dollar in 2017 cannot purchase as much as did a dollar in 2001, for example; as such, a 2017 dollar is not the same thing as a 2001 dollar. IMPLAN's deflators are indexes of inflation, with the deflator for the model data year set at 1.00.
The deflators are not used to create the social accounts or multipliers but are necessary for impact analysis whenever the dollar year of the event differs from the year of the model data. The same model year multipliers are used regardless of the dollar year of the event; it is the value applied to those multipliers that changes when the dollar year of the event differs from the year of the model data. Indeed, if one were to run an un-customized event using an event year that differs from the model year but views the results in the same year as the model, the multipliers calculated from these results will match the multipliers displayed in the multipliers tables of the model.
Why is this adjustment needed?
All the relationships in the multipliers are based on model year prices, so the direct effects applied to those multipliers need to also be in model year dollars - this is accomplished via the deflators. The value applied to the multipliers is the user-entered value divided by the deflator. The deflators also allow impact results to be viewed in years other than the model year, regardless of whether or not the dollar year of the event differs from the year of the model data.
While the event values and/or result values can be inflated or deflated, depending on whether the index value being applied is less than 1.00 or greater than 1.00 (i.e., depending on the industry/commodity and whether one is adjusting to a future or past value), we use a single term – deflators – to refer to all of these index values.
The output deflators are specific to the industry/commodity and are applied to the output value, while the same GDP deflators are the same for every industry/commodity and are applied to all of the value-added components.
The Bureau of Economic Analysis (BEA) provides historical output deflators which we use for past to current years. For projections into the future, we use the annual rate of change from the Bureau of Labor Statistics’ (BLS) employment growth model. The BEA also has historical GDP deflators which we use for past to current years. For projections into the future, we use the annual rate of change from the BLS employment growth model for "All Industries".
 Not all goods and services are inflationary every year. For example, the prices of consumer electronics often decrease over time. As another example, the prices of agricultural commodities rise and fall in response to many factors, including weather.