Overall and main downside surprise: m/m 0.2% vs. 0.3% consensus and 0.0% vs. 0.1% consensus, respectively. More interestingly, the Cleveland Fed’s core CPI nowcast for May m/m was 0.30%, with the actual forecast being 0.16%.
First, a comparison of different title metrics – a/a, snapshot, m/m:
Figure 1: Year-over-year CPI inflation (bold black), iInstant inflation (T=12, a=4) by Eeckhout (2023) for the CPI (bronze), month by month (green), Source: BLS via FRED, and author’s calculations.
Instantaneous inflation decreases to 1.8%, which is lower than CPI inflation of 2.45%, which corresponds to PCE inflation of 2%.
What about core and supercore metrics?
Figure 2: Instant inflation (T=12, a=4) by Eeckhout (2023) for core CPI (blue), chained core CPI, seasonally adjusted by the author using X-13 (bronze), PCE deflator (pink), CPI supercore (teal). The implicit CPI target incorporates the CPI-PCE differential of 0.45 ppt over the period 1986-2024. Source: BLS, BEA via FRED, BLSand the author’s calculations.
In addition to the positive information contained in the CPI measures, food prices continue to fall.
Figure 3: CPI component – food at home (blue) and chained CPI component – food at home, seasonally adjusted by X-13 by author (tan), both in 2021M01=0 logs. Source: BLS and author’s calculations.
In other words, while official annual home food inflation is 1.04%, instantaneous inflation is -0.2% (q/q is -0.8% annualized) and chain inflation (seasonally adjusted by the author) is -0.7%.
Figure 4: Instantaneous inflation rate (T=12, a=4) by Eeckhout (2023) for food at home (blue) and chained, seasonally adjusted by X-13 by the author (bronze). Source: BLS and author’s calculations.
