The FRED® Blog

The many flavors of inflation

Inflation is the rate of growth of prices. But which prices? It all depends. Above, we have four popular measures of inflation for different slices of the economy. The consumer price index (CPI) looks at a typical U.S. consumer’s basket of goods and evaluates its price over time. The producer price index (PPI) looks at the cost of inputs into the production process. The GDP deflator considers all goods that are part of GDP, which excludes imports and includes exports (the opposite of CPI and PPI). Finally, the personal consumption expenditures (PCE) price index uses a continuously changing basket of goods that is the basis for the private consumption component of GDP. The graph shows similar trends for these series over the past 10 years, except that the PPI is much more volatile. Use the slider to look at other years, where the pattern holds.

And there’s more. Each of these inflation indicators can be broken down into more-specific versions. In FRED, you can find many subsets of data in our new release tables for CPI, PPI, GDP deflator, and PCE price index. A popular version of the CPI is the one that excludes food and energy, two highly volatile components with strong seasonal fluctuations. Some people use this version of CPI when they want to track “core inflation.” FRED recently added two new subsets of price information as well: One is an experimental dataset that calculates the CPI for those over 62 years of age, and the other is compiled by State Street and computes an index from prices posted on websites. The graph below contains these three price indexes, plus the CPI from the above graph. As expected, the CPI excluding food and energy is more stable. It is perhaps a surprise that inflation for website prices (the State Street index) is consistently lower, which could mean that goods offered online have special characteristics.

For more on inflation, take a look at these educational resources from the St. Louis Fed:

How these graphs were created: Start from a series page, modify the graph to show the units “Percent Change From Year Ago,” and then add the other series through the search feature within the form. Note that the units of these series will be automatically converted to percent change as you add them. For the bottom graph, you need to be sure to undo this conversion for the State Street index, as it is already expressed in percent change.

Suggested by Christian Zimmermann

View on FRED, series used in this post: CPIAUCSL, CPIEALL, CPILFESL, GDPDEF, PCECTPI, PPIACO, USINFL

Some economies get stuck

If you want to compare economies, a good source is the World Development Indicators from the World Bank. Economic definitions differ and data exist in different currencies, but the World Bank makes the relevant reconciliations. For example, their data are in 2005 U.S. dollars (and thus in real, not nominal, terms). These graphs depict two countries currently in the news whose economies have stagnated. The first is Venezuela, which had been much richer than its neighbor Colombia but has had essentially no growth over the sample period. The second is the Ukraine, which suffered a deep recession in the early 1990s, along with other former Soviet bloc countries. The Ukraine never recovered, while its neighbor to the north, Belarus, did. In fact, the Ukraine’s situation is even grimmer: The data show GDP per capita, but do not show that the population in the Ukraine has actually been falling for several years, which means total GDP has been on a sharp decline.

How these graphs were created: For both, you can either start from the World Development Indicators release and narrow down the choices using the tags or simply search for “constant GDP per capita” for the countries of your choice.

Suggested by Christian Zimmermann

View on FRED, series used in this post: NYGDPPCAPKDBLR, NYGDPPCAPKDCOL, NYGDPPCAPKDUKR, NYGDPPCAPKDVEN

Euro area “lowflation” becomes “deflation”

Inflation in the euro area is measured by the Harmonized Index of Consumer Prices (HICP). “Price stability is defined as a year-on-year increase in the Harmonised Index of Consumer Prices for the euro area of below 2%” (the red horizontal line). The Governing Council of the ECB clarified that this target should be interpreted as “below, but close to, 2% over the medium term.” In the euro area, as in several other advanced economies, inflation was below target but above zero for about two years (see Contessi, De Pace, Li, 2014). The IMF recently defined this environment as “lowflation.”

The most recent measurements for the euro area have shown mild deflation, with year-on-year inflation rates slightly below zero. Most recently, low inflation rates across many countries have been due to a combination of economic slack in the global economy and low oil prices. The weak economic conditions in the euro area are an additional factor pushing its inflation rates even lower.

How this graph was created: Search for “Harmonized CPI,” and the series shown here should appear first in the list. Change units to “Percent Change from Year Ago.” To add the red horizontal line, use the new feature in FRED to create a user-defined line: Open the “ADD DATA SERIES” panel, select “Trend Line,” and change both the start and end values to 2.

Suggested by Silvio Contessi.

View on FRED, series used in this post: CP0000EZ17M086NEST

Russell Indexes in FRED

FRED recently added a set of stock market performance indexes from Russell Investments, and this graph offers three of them. These indexes measure the total market value of U.S. stocks—that is, the value of these stocks over time, as dividends are reinvested. The Russell 3000 index includes the largest 3000 firms in the stock market, representing about 98% of total capitalization. The Russell 2000 index includes 2000 of the smallest securities, and the Russell 1000 index includes 1000 of the largest securities. While the small caps (the 2000 index) sometimes deviate from the larger companies, in the long run their return is remarkably similar. In other words, it is difficult to see from these indexes whether small caps have a return that is different from that of other stocks.

How this graph was created: Go to the Russell source, select the series you want, and click “Add to graph.”

Suggested by Christian Zimmermann

View on FRED, series used in this post: RU1000TR, RU2000TR, RU3000TR

The sound and fury of gasoline prices

Gasoline prices have really gone up and down lately. With such wide-ranging short-term fluctuations, it’s hard to tell whether gasoline has become more expensive over the long run. So we turn to FRED. The CPI includes a component that tracks gasoline used for private transportation. We can compare this gasoline component with the CPI to see how gasoline prices have risen in relation to prices in general. The graph clearly shows all the stormy fluctuations for gasoline. But it also clearly shows something we may not have expected: The price of gasoline is now at the same level it would have reached had it simply followed the smooth evolution of the overall price index. We can’t depend on these price levels to coincide, of course, given the typical fluctuations of gasoline. And if the past decade is any indication of the future, gasoline prices will return to their higher levels.

How this graph was created: Search for “CPI gasoline” and select the monthly seasonally adjusted series. Then add the series “CPI.” (You can also work from the relevant release table to select the series you want.) Finally, to start the series at the same level instead of the 1982-84 index year, edit both series as follows: Choose “Index (Scale value to 100 for chosen period)” under Units and “1967-01-01” under Observation Date.

Suggested by Christian Zimmermann

View on FRED, series used in this post: CPIAUCSL, CUSR0000SETB01

The evolution of income inequality

Do you know that FRED includes data on income inequality? The data come from the income, poverty, and health insurance coverage release from the U.S. Census Bureau as part of its yearly Current Population Survey. The data cover both households and families, with geographic and racial subcategories. Do you also know the distinction between “households” and “families”? A household includes all people living in a housing unit; a family includes only those related by marriage, blood, or adoption.

The Gini ratios shown in this graph measure income inequality. Higher values indicate more inequality, and the graph clearly shows an upward trend for both households and families.

How this graph was created: Go to the release noted above, choose “gini” in the tags, choose the series you want to graph, and click “Add to graph.”

Suggested by Christian Zimmermann

View on FRED, series used in this post: GINIALLRF, GINIALLRH

Oil and the Norwegian stock market

Norway is a small country with an oversized oil sector. So how do fluctuations in crude oil prices affect its economy? It is too early to look at Norway’s GDP for any effects from the recent drop in oil prices. But we can look at its stock market. The graph above shows the price of North Sea oil (deflated to remove the general increase in prices) and the index of the Oslo Stock Exchange (converted to U.S. dollars and deflated as well). It is pretty obvious that there’s a strong relationship between the two. The relationship is even more obvious when you look at the scatter plot below, where each point corresponds to a date and each axis corresponds to one of the time series.

How these graphs were created: Search for “Share price Norway” and add the monthly index series to the graph. Note: We’ll use only monthly series here. Then add the series “Norway exchange rate” and “CPI United States” to series 1. Apply transformation a/b/c. Now select “Brent oil price” as series 2 and add “CPI United States” to it. Apply transformation a/b. Use the right y-axis for this series. (You may remove the axis labels, under the graph settings tab, if you think things have become too crowded with all these transformations.) Repeat these steps to create the second graph, but switch graph type to “Scatter” under the graph settings tab.

Suggested by Christian Zimmermann

View on FRED, series used in this post: CPIAUCSL, EXNOUS, MCOILBRENTEU, SPASTT01NOM661N

Seasonal interest rates

When we say “seasonal variation,” we’re referring to fluctuations in the data that follow a pattern according to the time of year. For example, retail trade is always higher just before Christmas. The sale of ski lift tickets is always higher during winter—at least in the Northern Hemisphere. Agricultural output is higher in the growing season. Could this variation also apply to interest rates? It turns out it can, under specific circumstances. In some markets, banks look for liquidity at various times. They typically face regulations that affect what they can carry in their books; depending on the country and other factors, they may have to satisfy these regulations every single day, at the end of the month, or on average over the month. The end-of-month option especially can introduce seasonality in overnight interest rates, as banks scramble to satisfy regulations at very specific times during the year. The graph above shows liquidity in euros, which spikes every last day of the month. The graph below, which covers banks in Denmark, shows a spike every Wednesday. (Special circumstances also apply, such as holidays: Note the spike on Monday, Christmas Eve 2007, for example.) In the lower graph, you can slide the sample window to the right to see that this spike does not always occur: Rules can change over time, as can general market conditions. In fact, at the very end of the sample (Sep. 2012 through March 2013), the spikes actually point down, as banks were trying to get rid of their excess liquidity.

How these graphs were created: Search for “daily overnight” and you’ll find various choices. The two presented above are those with seasonal variations.

Suggested by Christian Zimmermann

View on FRED, series used in this post: DKKONTD156N, EURONTD156N

Tracking the duration of unemployment

The latest recession was different from other postwar recessions. One striking feature is how the various durations of unemployment have changed. The fraction of long-term unemployed (>26 weeks) had never been the largest. But now it is the largest by far! Until now, the fraction of short-term unemployed (<5 weeks) has always been the largest. Now it’s second or even third. What’s so peculiar about this recession? Is this a new regime? To truly answer these questions, we most likely have to wait for new data to come in. FRED offers various tools to stay connected. 1. You can create a dashboard that allows you to track statistics. 2. You can place a widget on your web page that reveals the latest data for up to six series. 3. You can subscribe to email alerts for the latest updates of you favorite series. 4. You can put the relevant series in an Excel spreadsheet and refresh the data with a single click (thanks to our Excel add-in). 5. You can come back to this blog post from time to time, and its graph will automatically update with the latest data.

How this graph was created: Find the release table for unemployed persons by duration of unemployment, select the four relevant series at the bottom, and add them to the graph.

Suggested by George Essig

View on FRED, series used in this post: LNS13008397, LNS13025701, LNS13025702, LNS13025703

Parallel prices for oil-based fuels

The recent wild fluctuations in oil prices have been reflected in the end-user prices for various forms of fuel. This graph shows average prices at the pump for regular gas, diesel, and heating oil. What is remarkable is that they run nearly parallel to each other, except for a slow drift upward for diesel. These fuels have different patterns of seasonal demand (e.g., high demand for heating oil in winter and gas in summer), so their prices might reflect these variations. Yet, any seasonal price variations appear to be dwarfed by the price variations of the raw material in all three of these fuels: oil. Seasonal changes in demand are smoothed through storage of inventories and through price adjustments. Apparently, though, seasonal adjustments do not affect the prices of these fuels nearly as much as the price of oil does.

How this graph was created: Simply search for “Heating oil price,” then add the two other series. (Btw, the frequency of the series in this graph is monthly.)

Suggested by Christian Zimmermann

View on FRED, series used in this post: GASDESM, GASREGM, MHOILNYH

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