The month-on-month decline, even though the year-on-year rise. Pruning and sticky price inflation (m/m) have also declined.
First, recall that the 12-month inflation rate (that is, the y/y rate) is largely backward looking. The monthly indicators better reflect the current situation, albeit with louder noise.
figure 1: CPI chain inflation rate, annualized (blue), 12-month or year-on-year inflation rate (pink), in decimal form (ie 0.05 means 5%). NBER defines the recession date from peak to trough, shaded in gray. Source: BLS, NBER and author’s calculations.
Based on am/m, what are the other indicators for measuring overall CPI inflation?
figure 2: CPI chain inflation (blue), chain CPI (brown), 16% CPI modified inflation (red), sticky price CPI inflation (green), personal consumption expenditure deflator inflation (black), all in decimal form (ie , 0.05 means 5%). Chain CPI (brown) with seasonal adjustment using arithmetic deviation. The recession date (peak to trough) defined by NBER is shaded in gray. Source: BLS, BEA, Atlanta Fed, NBER and author’s calculations.
figure 2: CPI-all cities (blue),, in decimal form (ie 0.05 means 5%). NBER defines the recession date from peak to trough, shaded in gray. Source: BLS, NBER and author’s calculations.
The month-on-month CPI rate fell month-on-month, and both the average and sticky prices fell. Lower trimmed average inflation means that the decline is broadly based, not driven by outliers. The fall in sticky price inflation means that prices that do not change often are rising, but at a slower rate than before.
Turning to the core indicators (that is, excluding food and energy prices), we see the graph below (note that the vertical scale is the same as the range in Figure 2 to better illustrate how the core indicators exhibit less variability).
image 3: Chain CPI core inflation (blue), chain CPI core (brown), sticky price CPI core inflation (green), personal consumption expenditure core deflator inflation (black), all in decimal form (that is, 0.05 means 5%). Use Chain CPI (brown) with seasonal adjustment for arithmetic deviation. The recession date (peak to trough) defined by NBER is shaded in gray. Source: BLS, BEA, Atlanta Fed, NBER and author’s calculations.
Be careful to “record”. In the past 20 years, on a monthly basis, the inflation rate has been rising.
Figure 4: CPI chain inflation rate, annualized (blue), in decimal form (ie 0.05 means 5%). NBER defines the recession date from peak to trough, shaded in gray. Source: BLS, NBER and author’s calculations.
The final observation: whether the high inflation rate persists partly depends on changes in gasoline prices, as shown in Figure 5.
Figure 5: CPI year-on-year inflation rate (pink, left scale), CPI-gasoline component year-on-year inflation rate (yellow-green, right scale), in decimal form (that is, 0.05 means 5%). NBER defines the recession date from peak to trough, shaded in gray. Source: BLS, NBER and author’s calculations.
Fortunately, oil futures are falling, so there are signs that this will ease.
