Why Friends Don’t Let Friends Calculate 18 Month Not-Seasonally Adjusted Growth Rates

Bruce Corridor appears to suppose calculating 18 month inflation charges (both annualized or not) is simply nice. It is simply nice. So long as you don’t do it utilizing not-seasonally-adjusted information. For those who do this, you actually must be clear. Illustrative instance for CPI under.

Determine 1: 18 month annualized inflation for seasonally adjusted CPI-urban all customers (blue), and for not-seasonally-adjusted CPI-urban all customers (tan), calculated utilizing log differenes. NBER outlined peak-to-trough recession dates shaded grey. Supply:  BLS by way of FRED, NBER, and writer’s calculations.

My imaginative and prescient final time I recall the numbers is 20-400 (quite than 20-20) uncorrected, however even I can see the 2 sequence differ considerably at totally different instances.

In case reader CoRev goes to accuse me of manipulating the info, let me word that I take advantage of FRED sequence CPIAUCSL for seasonally adjusted CPI, and CPIAUCNS for seasonally unadjusted. All different calculations are fairly simple trying on the formulation within the legend field — until one is unacquainted with using pure logs, or distrusts them. (Right here is Jim Hamilton’s publish on using logs and log-differences, should you don’t belief Menzie Chinn both due to his identify or worldviews.

I have to say, 18 months is kinda odd selection. 1 month, 3 month, 12 month, 2 years, 5 years, okay. 1.5 years, effectively, one ought to have a purpose.