A User's Guide to the Inflation Nowcasting Website
Each day, the model produces nowcasts for four common inflation measures:
- PCE. Inflation in the price index for personal consumption expenditures, more commonly referred to as PCE inflation.
- Core PCE. Inflation in the PCE price index excluding food and energy, also known as core PCE inflation.
- CPI. Inflation in the consumer price index (CPI).
- Core CPI. Inflation in the CPI excluding food and energy, also known as core CPI inflation.
For each measure, the model reports two inflation rates:
- Monthly inflation: the month-over-month rate of inflation, seasonally adjusted, expressed as nonannualized percent changes.
- Quarterly inflation: the quarter-to-quarter rate of inflation, expressed in percentage terms at seasonally adjusted annualized rates (SAAR).
The inflation nowcasts estimate inflation data before they are officially released, by nowcasting the immediate past, present, and future. The nowcasts always fill in “the next data point”—or, in some cases, the next two data points, if we judge that there is enough information available for the nowcasting model to use. For example, during the month of January, we make inflation nowcasts of December’s monthly inflation rates--until they are officially released--and January’s monthly inflation rates. In January we also make nowcasts of the previous year’s fourth-quarter inflation rates until they are officially released, in addition to the current year’s first-quarter inflation rates. But once we get to February, we know the fourth-quarter’s official inflation rates, so we only need to nowcast the first-quarter’s inflation rates. (At that point, we are also nowcasting January’s monthly inflation rates until they are officially released and February’s monthly inflation rates, and so on.)
Reading and interpreting the tables
The inflation nowcasting website presents two tables. The first table reports the monthly nowcasts, and the second table reports the quarterly nowcasts. Monthly nowcasts are reported as the (nonannualized) seasonally adjusted month-over-month percent change in each inflation measure. Quarterly nowcasts are reported in percentage terms at seasonally adjusted annualized rates (SAAR). The first column, denoted “Nowcast month” or “Nowcast quarter,” corresponds to the month(s) or quarter(s) for which inflation measures are being nowcasted. The last column, “Updated,” corresponds to the date on which these nowcasts are generated. Our goal is to produce nowcasts every business day by 10:00 a.m. Eastern time.
Using the charting tool
The tables present a snapshot of the inflation nowcasts at a given point in time, but they do not show how the nowcasts have evolved over time. The charting tool allows the user to plot the history of nowcasts for a given inflation series (CPI, core CPI, PCE, and core PCE) for a given time frame (a particular quarter or month being nowcasted). In addition, alongside the sequence of nowcasts one can view the actual data released by the BLS or the BEA (where available) and see how the model’s nowcasts compared with the actual data release. The download button allows users to download the data underlying the charting tool. We walk through the charting tool in four steps.
Step 1: Select whether to view a sequence of quarterly or monthly nowcasts. For illustration purposes, suppose you are interested in viewing how quarterly nowcasts evolved for 2014:Q1, so click on the “Quarterly” tab.
Step 2: Using the pull-down menu, choose a time period to view its nowcasts. For our example, select 2014:Q1 as the “nowcast quarter.”
Step 3: The chart is displayed along with the legend bar that lists the names of all the series plotted. The actual data are displayed as big solid dots at the right hand side--they are only visible if the data have been released.
The chart also indicates monthly CPI and PCE release dates with a vertical line. Typically, these releases cause the nowcast estimates to move around compared with the previous day’s nowcasts because they may contain new and unanticipated information that helps inform the nowcasts.
In our example, the red line plots the sequence of nowcasts for 2014:Q1 corresponding to CPI inflation, and the single red solid dot shows the actual CPI inflation estimate for the quarter of interest based on BLS data. The blue line corresponds to the sequence of core CPI nowcasts, the orange line corresponds to the sequence of PCE inflation nowcasts, and the green line corresponds to the sequence of core PCE inflation nowcasts. The solid red, blue, orange, and green dots represent the actual inflation rates for each respective series. The x-axis displays the days on which the 2014:Q1 nowcasts were generated, beginning on January 2, 2014 (January 1 was not a business day), and ending on April 30, 2014, when the BEA released the quarterly PCE and core PCE inflation readings.
Step 4: One can select or deselect the series to plot by clicking on the series name in the legend bar. By default, all the available information for the selected nowcasted quarter (or month) is plotted.