Where is inflation really going? Marketers and economists are using this real-time inflation gauge to stay ahead of the curve CNN Business


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If you want to know how much a publicly traded company is worth at any given time, all you have to do is look up its market cap, which is updated in real time during trading hours.

But if you want to know how fast prices are rising in the US, you get two official updates per month, the Consumer Price Index and the Personal Consumption Expenditure price index. Both come with a delay, can be revised months later, and can even be delayed indefinitely in the event of a government shutdown, as was almost the case with September’s inflation data.

Despite these shortcomings, Federal Reserve officials rely on these government reports to help make crucial monetary policy decisions that directly affect the interest rates you pay on your mortgage and other types of debt. The rate of inflation the government achieves also affects how much you get in Social Security benefits and is likely to be a factor in determining your salary.

But a new real-time inflation gauge called Truflation is trying to fix some of the problems with government inflation data that has long been considered the gold standard.

While it’s valuable to have regularly updated inflation data, Truflation doesn’t have as much access to some categories that government data tracks, namely education and health care prices, two big expenses for many Americans. The government also has a much longer history of producing exceptionally comprehensive benchmark inflation reports.

Unlike PCE and CPI, Truflation arrives at a new inflation rate almost daily, drawing on over 60 different data sources that provide three unique prices for more than 18 million goods and services. Some of the data providers include Amazon, Walmart, Nielsen, Hilton and Zillow.

While the Bureau of Labor Statistics, the division of the Department of Labor that produces monthly CPI reports, hires a team of people to either physically go to businesses, call them, or scan websites to collect price data. for 80,000 goods and services across the country. Truflation pays for some of the data.

Over time, more providers have shared data for free because they understand that including it in the model will give them more up-to-date and accurate information about how competitive their pricing is, Stefan Rust told CNN. CEO and founder of Truflation.

This data goes through a rigorous process involving blockchain technology to verify its authenticity, which Truflation describes in its 20-page public methodology.

Like PCE and CPI, Truflation assigns relatively significant values ​​to categories to reflect how a consumer’s average income is distributed. For most consumers, housing makes up the bulk of their spending, and is therefore assigned a greater weight than, for example, clothing. This is why small increases in the cost of housing can end up having large impacts on the overall rate of inflation.

Truflation uses the same process the government does to calculate relative importance, but uses some different data to determine how consumers distribute their income. This accounts for part of the difference between government inflation data and Truffles.

Another discrepancy is that the inflation data is not seasonally adjusted, while the monthly government data is. This means that a rise in utility prices in the summer, when it’s usually more expensive to cool your home, would show up more in Truflations’ data than governments.

As of Wednesday, Truflation put the nation’s annual inflation rate at 2.23%, just inches away from the Fed’s 2% target. In contrast, May’s CPI report released Wednesday morning came in at an inflation rate of 3.3%, which is exactly in line with what Truflation predicted the gauge would reach based on its own data. Truflation is able to predict what government inflation reports will show by adjusting their data when the government comes out and collects its own price data to form its monthly reports.

Wall Street traders were the first group attracted by inflation, Rust said. They wanted the data to help them calculate where they thought, based on our data, the government’s BLS numbers would come out.

Danielle DiMartino Booth, who advised Richard Fisher when he was president of the Dallas Fed and is now CEO and chief strategist at QI Research, said she uses Truflation to identify where price pressures are building on a daily basis. That gives her a better understanding of what’s happening on the ground compared to government data, Booth told CNN.

While Fed officials have shown a greater interest in analyzing economic data from non-government sources to help form their views on the economy, it remains to be seen whether and how they are using inflation data. But it’s on their radar, said Rust, who says he’s met with researchers from the New York and Dallas Fed.

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