PCE, deflation?

[william the wie]

Anybody ever heard of this index? It tracks the Prices of actual Consumer Expenditures and is purportedly taking a deflationary track.

I have some questions before I declare the sky is falling:

What is the track record of this index and its analogs in other countries?

If the PCE is picking up on transitional costs associated with the launch of ACA does it matter if it is accurate?

If the PCE is picking up on increasing sales by increasing marginal returns industries such as robotics, additive manufacture and optronics then increasing wages should be on the way so this data may be irrelevant, is it?

@Old Fart, [MENTION=20854]Zander[/MENTION], [MENTION=2926]Toro[/MENTION],

 

[oldfart]

Anybody ever heard of this index? It tracks the Prices of actual Consumer Expenditures and is purportedly taking a deflationary track.

I have some questions before I declare the sky is falling:

What is the track record of this index and its analogs in other countries?

If the PCE is picking up on transitional costs associated with the launch of ACA does it matter if it is accurate?

If the PCE is picking up on increasing sales by increasing marginal returns industries such as robotics, additive manufacture and optronics then increasing wages should be on the way so this data may be irrelevant, is it?

@Old Fart, [MENTION=20854]Zander[/MENTION], [MENTION=2926]Toro[/MENTION],

All inflation measures, including this one, are highly correlated with oil prices. In fact, oil prices predict about 85% of short term fluctuations in all inflation indications. But oil prices and all of the indicators have essentially no correlation with inflation measures a year or more in the future. So if you want to predict short term price movements, just track oil prices. For longer term, you need a decent macro/monetary model.

 

[Zander]

The PCE has very short track record.....it was conceived of in 2005.

 

[william the wie]

My oops I forgot the actuarial age related spending impact. 1964 was the last big cohort of the Baby Boom and they turn 50 this year so consumption should decline. About 48 billion a year gross until roughly 2031 from the 1958-64 bulge. Net decline will start out low or zerio and then increasing returns industries should kick in on just about everything as with frozen food in the 1930s but on a much broader front thus reducing stress.

However the actuarial response is not big enough to trigger definitive detection -0.4% should not be detectable. Unless pipeline problems to Sudan and Kenya have been solved and I didn't get the memo something else is going on here.

 

[JimmieD]

Anybody ever heard of this index? It tracks the Prices of actual Consumer Expenditures and is purportedly taking a deflationary track.

I have some questions before I declare the sky is falling:

What is the track record of this index and its analogs in other countries?

If the PCE is picking up on transitional costs associated with the launch of ACA does it matter if it is accurate?

If the PCE is picking up on increasing sales by increasing marginal returns industries such as robotics, additive manufacture and optronics then increasing wages should be on the way so this data may be irrelevant, is it?

@Old Fart, [MENTION=20854]Zander[/MENTION], [MENTION=2926]Toro[/MENTION],

I keep up with it. When looking at inflation rates I consider the PCE, CPI, money growth rates, and interest rate spreads between TIPS and Nominal Treasuries.

http://research.stlouisfed.org/fred2/graph/?g=tmK

The BEA breaks down how they account for PCE: http://www.bea.gov/iTable/iTable.cfm?reqid=9&step=1&acrdn=2#reqid=9&step=3&isuri=1&903=65