Friday, December 30, 2011

BPP@MIT Data Show Inflation Trending Downward

The charts above shows monthly and annual inflation rates from the Billion Prices Project @ MIT over the 12 month period ending at the end of November.  According to the BPP website, the index is "designed to provide real-time information on major inflation trends, not to forecast official inflation announcements. We are constantly adding new categories of goods, but we do not cover 100% of CPI goods and services. The price of services, in particular, are not easy to find online and therefore are not included in our statistics."

Bottom Line: Monthly inflation, measured by the BPP @ MIT, has been trending downward since February, and at the end of November was showing slight deflationary pressures.  Similarly, BBP annual inflation has been trending downward since last summer and reached an eight-month low at the end of November.  According to this real-time measure of inflationary trends in the U.S. economy, inflationary pressures are gradually moderating, and there is even evidence now of short-term deflation for the month of November.    


At 12/30/2011 12:41 PM, Blogger W.C. Varones said...

It's obviously time for Zimbabwe Ben to start monetizing more debt!

QE infinity!!!

At 12/30/2011 1:00 PM, Blogger rjs said...

krugman had a post just like this, including the annual chart, not so long ago..

At 12/30/2011 1:03 PM, Blogger Benjamin Cole said...

Can anyone tell me why the Fed and Ben Bernanke-san are targeting zero inflation during the worst economic recession since the Great Depression?

WC Varones--think about Japan. They have had mild deflation for the last 20 years, and the yen has been very strong. Their industrial output has fallen 20 percent in that time frame, while their stock and equity markets have fallen by 80 percent. (BTW, USA industrial production doubled in that time frame, and we had moderate inflation, until recently when we have had bouts with deflation).

To seek robust economic growth is to embrace mild inflation---this is not hyperinflation, the bane of the Chicken Inflation Littles.

Ben Bernanke-san needs to be far more aggressive in stimulating the economy. The feeble, dithering policy he is following is much more what I would expect from the Bank of Japan.

At 12/30/2011 1:19 PM, Blogger Buddy R Pacifico said...

From the BPP@MIT website:


Data collection: our data are collected every day from online retailers using a software that scans the underlying code in public webpages and stores the relevant price information in a database>"

and; Monthly Inflation: The monthly inflation rate is the percentage change between the average of the daily online price index of the last 30 days and the average of the previous month"

so; Would not the latest Monthly Inflation figures include Black Friday and on-line shopping Monday figures, from retailers?

The latest month could be down because of a plethora of on-line shopping specials.

BTW, here is the Black Friday trend from Google Trend.

At 12/30/2011 1:21 PM, Blogger Benjamin Cole said...

Dr. Perry--Does the second chart want a blue line?

At 12/30/2011 1:30 PM, Blogger Mark J. Perry said...

It should be a red line. If you re-fresh your browser, it should be red. I incorrectly had a chart with a blue line when I first posted, but it's been fixed now.

At 12/30/2011 2:23 PM, Blogger morganovich said...

targeting zero inflation?

what color is the sky on your world?

they are aggressively targeting (and getting) inflation, even by their own measures.

BPP is more aptly compared to "core" than cpi and even then should run lower, as internet prices are always lower than the rest of retail and are much harder to increase and they ignore things like healthcare and education and massively overweight consumer electronics.

that would imply that core is over 3.2% (and likely more like 4-5%) and that headline once you add in food, energy, healthcare, and education is running more like 8%.

how do you get zero inflation targeting from that?

you live in a very strange fantasy world bunny.

there is nothing mild about the current inflation.

prices are moving just as they did in 1976. you never answer this question bunny:

do you believe inflation was high in the 1970's?

if you do, then it is also high now. the underlying moves in prices are the same, only the calculation has changed.

alternately, if you think inflation is really 3.9% now, then it never broke 5% in the 70's.

so which is it?

there is no way to claim inflation was high then and low now (apart from ignorance and statistical misrepresentation).


you keep making these unsupported claims about japan. all the period in the last 20 years with the strongest yen have had the best gdp growth, including the last 4 years which have shown a powerful yen appreciation and the best gdp growth from japan in 25 years.

the facts are simply not on your side there. they contradict your thesis in every way.

if a strong yen cause a weak japansese economy, there is just no way you would see such a consistent correlation between yen strength and growth.

massive and repeated stimulation did nothing to cure a japanese recession, it prolonged it, just as it is doing in the US now. you have mistaken the brake for the gas and instead of learning from the clear evidence that you are wrong, you just keep advocating pushing harder.

it is not a coincidence that the two worst recoveries from recession since ww2 have been the ones with the most activist monetary policy.

At 12/30/2011 4:06 PM, Blogger bart said...

Good grief... does no one ever talk to seniors who have been on SS for a few years and notice how their standard of living declines substantially?

Or how about selection bias and weightings etc., and especially about how medical is about 18% of GDP but only 6.5% of CPI... perhaps corporations being people somehow magically makes their medical costs about twice that of humans? /sarchasm

Then there's how BPP doesn't specify their entire methodology (let alone not at all covering services), most especially including reverse hedonics or how that can or box of [whatever] this year has different ingredients than last year.

Gawd! I call BS and spin.
They don't cover all goods and services and only cover online prices, and they're supposed to prove that CPI is correct???

Obviously neither Mr. Perry nor Krugman pays attention to simple data.

At 12/30/2011 5:18 PM, Blogger juandos said...

This comment has been removed by the author.

At 12/30/2011 10:33 PM, Blogger VangelV said...

do you believe inflation was high in the 1970's?

if you do, then it is also high now. the underlying moves in prices are the same, only the calculation has changed.

alternately, if you think inflation is really 3.9% now, then it never broke 5% in the 70's.

so which is it?

Don't bring logic into this please. These guys don't want to know.

My approach would be much simpler. We know that Costco gets the lowest price and adds its margin to come up with a price. Why not simply look at the price changes per unit of volume or weight in Costco over time?


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