A reader, critiquing the argument that the expanded Russian invasion of Ukraine could not explain accelerating inflation before February 2022, observes “The surge of inflation happened well before the war.” I don’t think this characterization is entirely accurate, but in any case, oil prices rose before the so-called “Special Military Operation”, and price pressures showed up concurrently.
Category Archives: inflation
Productivity and Costs in Q1
Productivity growth underperforms (-2.7% vs. -1.8% Bloomberg consensus, q/q AR), while unit labor costs surprises on the upside (+6.3% vs. +5.5% consensus, 3.3% previous).
Did the Expanded Russian Invasion of Ukraine Constitute “News”
Reader JohnH is unconvinced that the Russian invasion was at all important to the US economy, according to his comments to this post. Here is the revision in GDP expectations going from pre-invasion to post-invasion.
Inflation and Costs, One Year Ahead: What Do Businesses Think?
Paul Krugman reminds me why “expected” inflation doesn’t necessarily translate into one-for-one actual inflation, because of nominal rigidities like staggered contracts. He also brings my attention to costs that firms expect (as opposed to prices they expect), as measured by the Atlanta Fed’s “Business Inflation Expectations”. Here’s how those expectations stack up against others, and actual evolution of costs.
One-Year CPI Inflation Expectations
Slight bump up in March/April expectations, but still down relative to mid-2022.
CPI, PPI, and PCE Instantaneous Inflation
Based on Eeckhout, using a=4, T=12:
CPI Inflation in March: Downward, Month-on-Month
While year-on-year core rose, month-on-month fell, along with other measures of inflation that are aimed at getting the trend.
More on Cost-Push Shocks and Inflation Expectations in a Phillips Curve Context
Gianluca Benigno notes that the NY Fed’s GSCPI, used in this post on using a naive expectations augmented Phillips curve to predict inflation, can be used independently to predict inflation, as in Akinci, et al. “How much can GSCPI improvement help reduce inflation” (Feb 2023).
How To Calculate the Upper Bound Estimate on After Tax Real Mortgage Rates
One Year Ahead Inflation Expectations Continue to Decline
As of today: