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Gauging spending on gasoline and other energy goods

Prices for gasoline and other energy goods had already been rising before they spiked in the first quarter of 2022, after the Russian invasion of Ukraine. Personal consumption expenditures on gasoline and other energy goods (excluding natural gas and electricity) in that quarter were $451 billion, which is about $150 billion more than in the first quarter of 2021.

Since 2005, personal consumption expenditures on gasoline and other energy goods have averaged $343 billion per quarter. These expenditures are highly variable, however. Not surprisingly, they usually fall during recessions, which was especially clear during the recent recessions of 2008-09 and 2020. Many households curtailed travel when the COVID-19 pandemic struck in 2020, which reduced the demand for gasoline and pushed sales down precipitously. Gasoline sales have since rebounded, and nominal consumer expenditures on gasoline and other energy goods were already above average before the invasion of Ukraine.

The first FRED graph shows that these personal consumption expenditures on energy have risen significantly since World War II in nominal terms. Of course, the general level of prices has risen significantly as well, and consumer expenditures on all goods and services have grown with household income. (For more on real versus nominal gas prices, see this recent FRED Blog post.)

One indicator of the burden of higher energy prices on households is reflected in the share of total consumer expenditures devoted to gasoline and other energy goods. So, the second FRED graph plots the ratio of personal consumption expenditures on gasoline and other energy goods to total personal consumption expenditures. We see that the share of consumption devoted to energy has generally declined since World War II.

This trend was significantly interrupted during the 1970s and again before the 2008-09 recession. War in the Middle East and the Arab oil embargo in 1973, the Iranian revolution in 1978, and Iraq’s invasion of Iran in 1980 all fueled oil price spikes as well as spikes in the share of personal consumption expenditures devoted to energy purchases. Since then, the share of personal consumption expenditures devoted to energy purchases has consistently been below the share that prevailed before the 1970s.

Despite the sharp increase in gasoline prices in the first quarter of 2022, purchases of gasoline and other energy goods comprised just 2.7% of total consumer expenditures in that quarter, which is about average for the period since 2010. Additional energy price increases could drive the expenditure share higher than it was in the first quarter. But currently, the share of personal consumption expenditures has been well below the peak of 6% reached in 1980.

How these graphs were created: First graph: Search FRED for “Personal consumption expenditures: Nondurable goods: Gasoline and other energy goods.” The chart appears as is with the default dates. Second graph: Search FRED for “Personal consumption expenditures: Nondurable goods: Gasoline and other energy goods.” From the “Edit Graph” panel, add a series to the workspace by searching for “PCEC” under “Customize data.” Add the series. For the formula,  enter a/b*100 to express as percentage and click “Apply.”

Suggested by Jason Dunn and David Wheelock.

Referring to the interest paid on reserves

A rate by any other name...

The Fed’s monetary policy tools are used to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy. These tools evolve over time as the economy evolves, and so it makes sense the terms that describe these tools also change.

The FRED graph above shows three different interest rates the Board of Governors has set on the reserve balances commercial banks keep at their corresponding Federal Reserve Banks. The time frame is between October 9, 2008, and when this post was written:

  • The interest rate on required reserves (the dashed red line) and the interest rate on excess reserves (the solid orange line) were identical. The former applied to balances kept in fulfillment of reserve requirement ratios, and the latter applied to balances kept in excess of those requirements. On March 26, 2020, the reserve requirement ratios were lowered to zero, so the distinction in the type of reserves lost any practical significance. Both of these interest rate data series were discontinued on July 28, 2021.
  • As of July 29, 2021, the “interest rate on reserve balances” (the solid blue line) became the new name of the interest rate paid by the Federal Reserve on all reserve balances kept by commercial banks.

The FRED Team uses an automated process to name many of its data series. This process makes tracing the current data back to their sources easier. For information on series name changes, copyright statements, and much more, check the metadata in the notes below every FRED graph.

How this graph was created: Search for and select “Interest Rate on Excess Reserves (DISCONTINUED).” From the “Edit Graph” panel, use the “Add Line” tab to search for and select “Interest Rate on Required Reserves (DISCONTINUED).” Repeat the last step to add “Interest Rate on Reserve Balances” to the graph. To change the style and color of the lines in the graph use the “Format” panel.

Suggested by Diego Mendez-Carbajo.

Where CPI inflation isn’t so high

Including a closer look at rents

There’s no doubt that consumer price inflation is relatively high. The consumer price index (CPI), though, is a composite of the prices of many goods and services. Thus, some show even higher inflation, such as energy and transportation, and others show lower inflation. This is what the FRED graph above is all about.

The blue bar shows overall CPI inflation. The other bars display specific categories with lower-than-average inflation. For example, both education and health services, which have had noteworthy price increases in the past, are showing much more restraint now. There are also puzzles, like alcoholic beverages, toys, and communications (for example, computers). Prices that are administratively set, such as water and trash collection, are fairly stable.

And then there’s a surprise: rents. The rent category in the CPI increases less than the overall CPI, but the news media have been referring to large rent increases for some time. Why the difference?

The reason is that the news media and the CPI consider different pools of rents. The news media mostly refer to rents that new renters face. The CPI has a rent pool that includes mostly continuing renters, whose rents are more stable or haven’t increased yet. In addition, the CPI’s rents survey samples participants every six months, precisely because rents are usually so stable. If rents have increased, there can be a delay in that increase showing up in the rents component of the CPI.

How this graph was created: Start from the CPI release table: Check the series to display, click “Add to Graph,” and shorten the sample period to the last two observations. From the “Edit Graph” panel, use the “Format” tab to choose the bar graph option.

Suggested by Christian Zimmermann.

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