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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


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