Federal Reserve Economic Data

The FRED Blog has used ALFRED graphs to discuss the regular revisions to employment data and the periodic updates to real gross domestic product data. Here, once again, we tap into ALFRED to discuss revisions and updates to consumer price index (CPI) data.

The bars in the ALFRED graph above show the annual CPI inflation rates between 2018 and 2021 using two different vintages of CPI data: before (in red) and after (in blue) the January 2022 revision and update to the CPI data. The differences in annual inflation rates are minimal, so what is involved in those revisions and updates?

The revisions are conducted every year and involve adjusting many of the 80,000 individual prices recorded every month for changes in their seasonal patterns. For example, fresh fruit prices are lower during harvest on account of the bountiful supply available. The BLS considers these price swings and reports seasonally adjusted price indexes. However, the seasonal changes in prices can be as fickle as the seasonal weather and the corresponding adjustment factors used by the BLS require regular evaluation.

The updates are conducted every two years and involve adjusting the relative weights of goods and services purchased across eight different categories of consumer spending. For example, over the past two years of COVID-19-induced disruptions to regular life, consumers shifted their food purchases away from restaurants towards groceries. The BLS considers those changed patterns by introducing new spending weights in its market basket for goods and services.

Some research shows the impact large-scale and less-frequent revisions and updates to CPI data have on the accurate calculation of consumer price inflation. In that light, the small differences in annual inflation rates across data vintages reflected in the ALFRED graph are a testament to the value of more frequent and smaller-scale updates to CPI data. More accurate data facilitates better decision making, even if the reported inflation rates do not change much.

How this graph was created: Search ALFRED for “Consumer Price Index for All Urban Consumers: All Items in U.S. City Average.” By default, ALFRED shows a graph with two sets of bars: the most recent vintage and the prior vintage. Add additional vintages by using the “Add Line” tab and select the date of the desired vintage from the “or select a vintage” dropdown menu. Change the start date and the end date above the graph to customize the number of data points shown.

Suggested by Diego Mendez-Carbajo.

The Russian invasion of Ukraine has amplified concerns about the price of gasoline. And for good reason: In March, prices at the pump surged over $4 per gallon for the first time since July 2008. This increase is more than 50% above prices in March 2021, which were about $2.80 per gallon. Gas at $4 per gallon sounds scary, but are real gas prices really that high?

By real prices, we mean prices that take overall inflation into account. To investigate, we compare nominal gas prices (the price you pay at the pump) to real gas prices, which we compute by dividing the nominal price by the consumer price index (CPI) and multiplying by 127.5, the value of the CPI in January 1990. By doing this, we normalize the gas price to the value of the dollar in January 1990, allowing us to compare gas prices across time and account for overall inflation.

The FRED graph above shows the result: Real gas prices have indeed increased in the past few months; however, they have only recently reached their pre-pandemic level. While nominal gas prices have increased rapidly over the past few months, real gas prices were still lower than they were for most of the 2006-2014 period. In fact, today’s real prices are within one standard deviation of the mean over the past 15 years.

These normalized, real gas prices have remained relatively flat over the past 5 years, which tells us that the high nominal prices are substantially driven by high inflation. Now we understand that an essential driver of the long-run increase in the price at the pump is inflationary pressures.

How this graph was created: Search FRED for “gas price,” then from its graph click on “edit graph”, under “customize data,” and apply formula (127.5*a)/(b). Then open the “add line” tab and search for the gas price again.

Suggested by Julian Kozlowski and Sam Jordan-Wood.

The FRED Blog sometimes taps into ALFRED, the archive of historical versions (or vintages) of FRED data. Today’s post does just that to discuss how the Bureau of Economic Analysis (BEA) periodically updates its quarterly and annual gross domestic product (GDP) figures to produce more accurate and complete figures of overall economic activity.

The ALFRED graph above shows seven different vintages of real GDP for the second quarter* and third quarter of 1991. The vintage dates included in the series names are the dates when the BEA released a comprehensive update to the data series. While a data revision incorporates newly arrived source data to paint a more complete picture of current or very recent economic conditions, a comprehensive data update reflects changes in economic and statistical standards applied to the whole economic record.

Comprehensive updates typically take place every five years, give or take a year or two, depending on business cycle conditions. On those dates, the BEA also updates its GDP statistics by moving forward the reference year for its inflation adjustment and price measures. The legend on the left axis of the ALFRED graph lists the reference year for the seven comprehensive updates to the real GDP series available in our database: 1987, 1992, 1996, 2000, 2005, 2009, and 2012. As the general price level rises over time, each successive bar is taller than the previous one. However, absent substantial changes to the types of economic activity being measured, the compounded annual rates of growth of real GDP record very small differences (see example here).

At the time of this writing, the latest comprehensive update was released in July 2018. Although the date for the next hasn’t been announced yet, it could be completed as early as 2023. Whenever the BEA releases those updated data, FRED will make them available through its website and ALFRED will add another vintage to its series repository.

* Why did we include the second quarter of 1991 in the graph? FRED went live online on April 18, 1991, the second quarter of that year.

How this graph was created: Search ALFRED for “Real Gross Domestic Product.” By default, ALFRED shows a graph with two sets of bars: the most recent vintage and the prior vintage. Add additional vintages by using the “Add Line” tab and select the date of the desired vintage from the “or select a vintage” dropdown menu. Change the start date and the end date above the graph to customize the number of data points shown.

Suggested by Diego Mendez-Carbajo.