How Large Are Inflation Revisions? The Difficulty of Monitoring Prices in Real Time

Richard Audoly, Richard Crump, Martín Almuzara, Davide Melcangi and Roshie Xing
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Martín Almuzara: https://www.newyorkfed.org/research/economists/almuzara

No 20230907, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: With prices quickly going up after the COVID-19 pandemic, inflation releases have rarely been as present in the public debate as in recent years. However, since inflation estimates are frequently revised, how precise are the real-time data releases? In this Liberty Street Economics post, we investigate the size and nature of revisions to inflation. We find that inflation estimates for a given month can change substantially as subsequent data vintages are released. As an example, consider March 2009. With the economy contracting amid the Global Financial Crisis, the twelve-month inflation rate for personal consumption expenditures (PCE) excluding food and energy dropped from an initial estimate of 1.8 percent to 0.8 percent in the current series. The difference is dramatic and points to the difficulty of monitoring inflation in real time. Our results suggest that there is significant uncertainty in measuring inflation, and the key features of the recent spike and subsequent moderation of inflation may look quite different in hindsight once further revisions have taken place.

Keywords: Inflation (search for similar items in EconPapers)
JEL-codes: E31 E52 (search for similar items in EconPapers)
Date: 2023-09-07
New Economics Papers: this item is included in nep-ban
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