Short Horizon Inflation Expectations – Survey and Market Based

One year horizon:

Figure 1: CPI inflation year-on-year (black), median expected from Survey of Professional Forecasters (blue +), median expected from Michigan Survey of Consumers (red), median from NY Fed Survey of Consumer Expectations (light green), forecast from Cleveland Fed (pink), mean from Coibion-Gorodnichenko firm expectations survey [light blue squares], all in %. November NBER defined peak-to-trough recession dates shaded gray. Source: BLS, University of Michigan via FRED and Investing.comPhiladelphia Fed Survey of Professional ForecastersNY FedCleveland Fed and Coibion and Gorodnichenko, and NBER. 

Household and firm survey based forecasts remain higher than economist based forecasts, as well as economist and market indicator based (Cleveland Fed) expectations.

What is interesting is how household survey based expectations have diverged in recent months from gasoline prices. Over the 2019-2022 period, each ppt of y/y gas price inflation is associated with about 0.3 ppts of headline CPI inflation.

Figure 2: Year-on-year CPI inflation (black, left scale), Michigan year-on-year expected inflation,  as of given date (red, left scale), and gasoline price inflation (green, right scale), all in%. NBER defined peak-to-trough recession dates shaded gray. Source: BLS via FRED, University of Michigan via FRED, EIA via FRED, NBER, and author’s calculations.

On this basis, I would have expected more of a decline in the Michigan number. Of course, a lot of other things go into expectations (as well as overall CPI inflation), so I leave this as an open question.

Market based (Treasury-TIPS spread) based expectations for five year horizon:

Figure 3:  Five year inflation breakeven calculated as five year Treasury yield minus five year TIPS yield (blue), five year breakeven adjusted by inflation risk premium and liquidity premium per DKW (red), both in %. Source: FRB via FRED, Treasury, KWW following D’amico, Kim and Wei (DKW) accessed 12/3, and author’s calculations.

25 thoughts on “Short Horizon Inflation Expectations – Survey and Market Based

  1. pgl

    Who knew Chris Christie had such a racist and vile niece?

    After getting forced off an airplane for asking passengers who appeared to her to be Latino whether they were drug mules, a niece of former New Jersey Gov. Chris Christie bit, kicked and spit on Jefferson Parish sheriff’s deputies trying to detain her on Thanksgiving Day at Louis Armstrong International Airport, authorities said.

  2. pgl

    The NYPost must have found someone who was a Vulcan mind meld between Bruce Hall and JohnH:

    Kudos to the New York Times (and other elite organs of journalism) for their full-court press on covering the courageous protests in China against Xi Jinping’s insane “zero COVID” policies and for the sympathy they’ve mustered for average people suffering under an oppressive yoke. But where was this nuanced understanding when North America’s own mad COVID overreaction was in full swing? Nowhere in evidence. In April 2021, for example, the Times’ Max Fisher was suggesting people uncritically accept future lockdown measures in the United States and western Europe and obliquely praising them as conducive to a “desire to cope by looking out for one’s neighbors.”
    Contrast that with his writing on the Chinese protests last week: “Outside observers could be forgiven for seeing hints of the Arab Spring, even revolution, in the protests sweeping China’s cities.” The paper of record also ran news articles alleging the existence of a sinister cabal of right-wingers masterminding protests against (anti-science) “stop the spread” measures and countless op-eds defending (completely useless) school closures, social isolation and other public-health disasters. For our progressive-dominated media, US citizens pushing back against the policies that kept their kids out of school, destroyed their business and broke their lives apart were either conspiracy-minded whackjobs or their dupes. (And remember, too, that even at the time praise for Black Lives Matter protests flowed alongside simultaneous damnation of anti-lockdown protests).

    I lost count trying to keep up with the bizarro comparisons and pieces of disinformation from the worst rag in NYC. This is why the only productive use of the NY Post is lying one’s bird cage.

  3. CoRev

    Personally I think using gasoline as a proxy for the attack across all energy results in this question: “On this basis, I would have expected more of a decline in the Michigan number. Of course, a lot of other things go into expectations (as well as overall CPI inflation), so I leave this as an open question.”

    Concentrating on gasoline while ignoring the others, diesel, fuel oil, electricity, natural gas, other oil distillates, etc. gives a false and limited picture of energy’s impact on inflation, and particularly expectations of inflation.

    just my thoughts.

  4. Bruce Hall

    Just looking back:

    February 17, 2021 at 1:07 pm
    “The five year breakeven has risen further, to 2.37% as of yesterday (2/16).”

    WAIT, WAIT – Bruce Hall told us last night we are in hyperinflation so this cannot be right. We must check the other breakeven rates as Bruce is sure Menzie is misrepresenting the data. So let’s check with FRED:

    10-year: 2.24%
    20–year: 2.16%
    30-year: 2.10%

    Damn it the market data MUST be wrong. OK – time for Judy Shelton to manipulate her datasets to prove that Brucie’s HYPERINFLATION fear is warranted.

    March 7, 2021 at 8:51 am
    Everyone repeat after me. We do not have an inflation crisis. We do not have a housing crisis. We do get a lot of dumb comments from the Usual Suspects. But hey!

    … and then

    “It’s tough to make predictions, especially about the future.”

    ― Yogi Berra

    1. pgl

      I have a new idea for Brucie to take out his apparent anger. Make like his hero Nick Fuentes and participate in a food fight at In & Out. It would be more adult than the little tantrums Brucie likes to throw.

  5. pgl

    JohnH’s obsession with attacking France for their positions in the Middle East has led him to cite some rag headed by Joe Stork as his authority for his late soap box:

    Before joining HRW in 1996, Joe Stork was a highly visible pro-Palestinian political activist involved in the Middle East Research and Information Project (MERIP). He was also a co-founder and editor of Middle East Report 17 (Safian 2009). MERIP was centrally involved in activities of the radical Left,18 and its rhetoric reflected Marxist anti-imperialist ideology. MERIP Reports carried laudatory interviews with terrorist leaders and other activists. After the murder of Israeli athletes at the 1972 Munich Olympic Games, a MERIP editorial urged socialists to “comprehend the achievements” of the atrocity. “Munich and similar actions cannot create or substitute for a mass revolutionary movement….But we should comprehend the achievement of the Munich action.” While noting that this did not justify the murders, the editorial declared that this action “has provided an important boost in morale among Palestinians in the camps” (MERIP Report 1972). Similarly, after a Palestinian terror attack on an Israeli school on May 15, 1974, MERIP declared that “all Israeli settlers are potential targets of the Palestinian resistance” (MERIP Report 1974).

    Detailed research published by Safian notes Stork’s participation in a conference on “Zionism and Racism” at the University of Baghdad in 1976, under the auspices of Saddam Hussein (Safian 2009). Stork’s presentation is published in the conference volume19 and includes references to the “Zionist colonization of Palestine” (p. 209), the “Zionist settler-colonial enterprise” (p. 214), and the “Zionist theft of the property and productive resources” (p. 218). Referring to the Arab defeat in 1967, Stork declares: “…the single most important cause lay with the failure of the regimes in question to mobilize their societies for the kind of protracted struggle that is critical for the liberation of Palestine” (p. 225).

    In his response to criticism that included these quotes, Stork wrote: “Most of them I do not recognize, and they are contrary to the views I have expounded for decades now. For instance, selective excerpts about the Munich massacre come from an unsigned editorial that appeared 37 years ago where at the time I was one of seven volunteers that produced the publication.”20

    But this radical post-colonial rhetoric and distortion of events to fit this framework did not end as Stork matured, but continued through the 1980s and 1990s. In the September 1980 edition of MERIP reports (p. 6), he confused cause and effect referring falsely to Jordan’s “Black September attack on the Palestinian resistance in 1970.” In this piece, as Safian notes, Stork also refers disdainfully to the Camp David “Peace” Treaty (p. 9) and attacks Jordan as a “classic mercenary state” (p. 10) for failing to sufficiently support the Palestinian cause. Additional articles such as “Nuclear Shadow over the Middle East” (Stork 1986), and “North Africa Faces the 1990s” (Stork 1990), use similar ideological rhetoric to attack Israel. In 1992, Stork wrote a chapter on “U.S. policy and the Palestine Question” for a book entitled The United States and the Middle East: A search for new perspectives, edited by Hooshang Amirahmadi (Stork 1992). In this piece he continued to use the same kind of radical vocabulary, attacking “Zionist hegemony,” new colonialists, American-Israeli conspiracies, “the elaborate ritual labeled the peace process” and Israel’s democratic values.

    In examining Stork’s publications spanning over twenty years, there is no hint of any expertise or interest in international moral or legal norms in general, or human rights, in particular. Instead, the consistent focus is on attacking Zionism, Israel, and American imperialism in the Middle East, while promoting the Palestinian narrative.

    Since joining HRW, Stork has continued to promote this ideological agenda, and as of 2004 he was still included in the “MERIP media resource list.” In 2007 MERIP published an article on a panel discussion in which Stork joined the other participants in supporting the Durban-based Boycott, Divestment and Sanctions (BDS) movement against Israel (Horton 2007). In a public letter to President Bush (HRW Letter May 11, 2008), Stork and his co-authors distorted international legal terminology, repeated incomplete or false analyses of international law (including the allegation of “collective punishment”), and minimized or omitted Hamas’ attacks on Israeli border crossings where humanitarian aid is delivered, as well as the diversion of that aid by Hamas. Stork’s responses to substantive criticism consist of ideological allegations and ad hominem attacks.21

    In these and many other examples, including a January 2008 statement on Gaza (HRW News Release Jan. 25, 2008), Stork’s work for HRW reflects an absence of credible methodology, and a lack of accurate and properly-sourced legal analyses, while favoring political diatribe, loosely couched in the terminology of international law. Similar properties characterize the August 2009 HRW report accusing Israel of the morally odious crime of killing Palestinian civilians waving white flags, which Stork co-authored (HRW Report Aug. 13, 2009).

    Look – JohnH cites a lot of highly discredited garbage but his latest soap box is beyond revolting.

    1. JohnH

      HRW’s hiring Stork as Deputy Director for Middle East and North Africa at is all you need to know about him. He also sits on the advisory committees of the American Friends Service Committee, Foreign Policy in Focus and the Iraq Revenue Watch project of the Open Society Institute.

      pgl just loves to indulge in character assassinations and ad hominem attacks.

      1. pgl

        Donald Trump was President of the United States. I guess he was a wonderful person too. Jonny boy’s defense of his BS usually goes this way. When questions about the credibility of his “experts” are raised he goes back to that scene in Guide for a Married Man (1963) DENY, DENY, DENY.

      2. pgl

        HRW hires a lot of people some of which have been accused of all sorts of questionable behavior especially writing poorly research questionable report (Jonny’s boy forte). This one went to questionable judgment:

        The controversial gift came with a caveat that it could not be used to support LGBT advocacy in the Middle East and North Africa.

        Look – HRW may have done so decent work but Jonny boy has this bad habit of trusting anything from anybody that appears to support his latest soap box rant. That the French choose not to join that 2003 Bush43 mistake because they wanted some Middle East lucrative oil contract is a lie. But Jonny boy never admits he lies. Neither does Donald Trump.

      1. Macroduck

        ltr posts the same bit of “China is the Bestsest!!!” bit of Covid propaganda, day after day. The “source” of the data is Worldometer, but Worldometer relies on official sources from each country. And here’s Worldometer’s disclaimer:

        “Limited testing and challenges in the attribution of cause of death mean the cases and deaths counts may not be accurate.”

        China claims a Covid mortality rate two orders of magnitude lower than that of the U.S. China’s reports of its data “may not be accurate” because China has lied about Covid from the outset. Inadequate vaccines, dishonest reporting of data and hygiene theater are all part of China’s Covid response. And every day, ltr shovels the same steaming pile of official Chinese lies into comments here.

  6. pgl

    A little good news from Iran:

    Iran has abolished the morality police, according to an announcement by the attorney general carried on state media, following months of protests set off by the death of a young woman who was being held by the force for supposedly violating the country’s strict Islamic dress laws. The decision, reported by state news outlets late Saturday night, appeared to be a major victory for feminists who have sought for years to dismantle the force and for the protest movement ignited by the death of the young woman, Mahsa Amini, 22, in September. The unrest has amounted to one of the biggest challenges in decades to Iran’s system of authoritarian clerical rule and the decision to scrap the morality police was the government’s first major concession to the protesters.

  7. pgl

    Oh my – Hershel Walker is upset that Obama was mean to werewolves!

    Georgia Senate candidate Herschel Walker fails to see the humor in former president Barack Obama’s jokes about Walker’s preference to be a werewolf rather than a vampire. Appearing on Fox News, the candidate claimed Obama did not “tell the whole story” when joking about comments Walker made in November where he said, “I don’t know if you know, but vampires are some cool people, are they not? But let me tell you something that I found out: A werewolf can kill a vampire. Did you know that? I never knew that. So, I don’t want to be a vampire anymore. I want to be a werewolf.” The remarks prompted Obama to joke this past week at a campaign event for Sen. Raphael Warnock ahead of Georgia’s Dec. 6 run-off election. “Since the last time I was here, Mr. Walker has been talking about issues of great importance to the people of Georgia, like whether it’s better to be a vampire or a werewolf,” Obama said. “This is a debate that I must confess I once had myself … when I was seven.”

    “Well, what’s sad is they’re always trying to mislead people,” Walker told Fox host Maria Bartiromo on Sunday after Obama poked fun at his comments. “That’s the same as you listening to… Obama talking about I’m talking about vampires and werewolves… Why don’t they tell the whole story?”

    Walker discussed his internal would-you-rather werewolf vs. vampire debate in the context of recalling a movie he said he had watched about a vampire. He concluded his story by talking about the importance of faith because in the movie, he said, a person who did not believe in God tried to kill a vampire with a cross and failed because they didn’t have faith. On Fox, Walker said, “The whole story is the story involved people having faith, having faith and continuing to go out and do your job, having faith to get things done. So they don’t tell you the whole story.” If Walker was dissatisfied with Obama ribbing him, he likely won’t be happy with Saturday Night Live’s portrayal of him either. The show made a mockery of Walker over the weekend.

    The whole story involves Walker’s religious faith? So when Hershel prays – he bows down to werewolves? Huh – I bet Rev. Warnock prays to Jesus not a werewolf.

  8. pgl

    As I was watching England play Senegal at the World Cup in Qatar, I started wondering who owns the oil rights in the host nation. I bet JohnH thinks he knows. After all Chevron and BP shut Total out of Middle East oil according to JohnH and his favorite “sources”.

    Oh wait the state owned Qatar Petroleum owns all oil rights in Qatar. Now it turns out the French Total Energy sold some of its African oil rights to Qatar Petroleum back in 2019.

    Oh what a shame – JohnH’s pet sources of disinformation led him astray again!

    1. Moses Herzog

      I don’t care what anyone says Pulisic ROCKS!!!!!

      I was super sad to see Poland go down. After USA I was pulling hardest for Poland because their heroic national behavior during the Russian invasion of Ukraine. We love you Poland!!!!!

      1. pgl

        Pulisic had a golden opportunity 5 minutes in our match with the Dutch. Of course the real problem was that our vaunted defense sort of folded before the mighty Dutch. Oh well the young lads can get ready for 2026!

  9. pgl

    Georgia beat LSU 50-30 last night in Atlanta but it seems it was not a good night for Hershel Walker:

    Those viral comments were a tipping point for Scott Hay, 55, who said he cast his ballot for Walker in November but has come to regret it, after learning more about the GOP candidate, including allegations from his past. He’ll vote for Warnock on Tuesday. “I’m a Republican and I’ve never voted for anything but Republicans, and I cannot vote for Herschel Walker,” Hay said as he waited outside Mercedes-Benz Stadium. Backing Walker earlier this fall, Hay said, “I thought … I’m a Georgia fan. How bad can he be? Because I don’t like Warnock at all. But he’s pretty bad.”

Comments are closed.