Paul Krugman jogs my memory why “anticipated” inflation doesn’t essentially translate into one-for-one precise inflation, due to nominal rigidities like staggered contracts. He additionally brings my consideration to prices that companies anticipate (versus costs they anticipate), as measured by the Atlanta Fed’s “Business Inflation Expectations”. Right here’s how these expectations stack up towards others, and precise evolution of prices.
Determine 1: Yr-on-year PPI for remaining demand items and providers (black), in common hourly earnings for manufacturing staff and nonsupervisory staff (tan), unit labor prices (inexperienced), and inflation from Survey of Companies Inflation Expectations (sky blue squares), and Survey of Skilled Forecasters median (blue +). NBER outlined peak-to-trough recession dates shaded grey. Supply: BLS through FRED (FRED sequence PPIFIS, AHETPI), Atlanta Fed, Coibion-Gorodnichenko SoFIE, Philadelphia Fed,NBER, and creator’s calculations.
It’s fascinating to me to look at (as anticipated) unit labor prices don’t transfer one-for-one with anticipated inflation as measured by the Coibion-Gorodnichenko SoFIE median. One shouldn’t take an excessive amount of from the hole between the typical wage and unit labor prices, given robust compositional results in the course of the pandemic.
For the assorted CPI inflation measures, see this post.