The Inflation Surge Forecasted (Or Not)

Time for a retrospective on how the various surveys are doing on forecasting year-on-year CPI inflation.

Figure 1: Actual CPI y/y inflation (bold black), U.Michigan survey (tan), NY Fed survey (blue), and Survey of Professional Forecasters (green +), all in %. November CPI is Cleveland Fed nowcast of 12/8. December U.Michigan observation is preliminary. NBER defined peak-to-trough recession dates shaded gray. Source: BLS, U.Michigan via FRED, NY Fed, Philadelphia Fed, NBER and author’s calculations. 

Several interesting points.

  1. SPF as of August was spot on.
  2. NY Fed diverged substantially from Michigan.
  3. Michigan evidenced some wild variability over the last four months.

Note that the downside surprise on inflation expectations was matched by upside surprise in consumer sentiment in the Michigan survey.

Figure 2: Michigan survey on inflation y/y (tan), on sentiment (teal). Bloomberg consensus (pink +) December figures are preliminary. NBER defined peak-to-trough recession dates shaded gray. U.Michigan via FRED, NBER, and Bloomberg.