US Daily: Upcoming Methodological Changes Will Likely Lower Measured Core PCE Inflation

研报英文原文证据摘录

US Daily: Upcoming Methodological Changes Will Likely Lower Measured Core PCE Inflation

cessories. This change partially addresses our

second concern above, since the CPI software and accessories component will now make

up a smaller share of the revised PCE component. But we continue to think that 1) the

software and accessories weight is probably exaggerated, 2) the new measure will likely

continue to be unduly influenced by accessories price changes, and 3) quality

adjustment will probably remain inadequate with the new PPIs, as we discuss below.

Exhibit 1 shows the current computer software and accessories component along with

our estimates of the effect of the methodological change. We show two potential

estimates because BEA has not detailed how it will weight the three inputs to the new

series. Our best guess is that the revised series will be closer to the dark blue line, and we

incorporate that assumption into our forecasts.

Since the data processing and videogames PPIs are currently running at a slower pace

than the software and accessories CPI, this will likely result in a downward revision to

core PCE inflation. We estimate that the new series could lower year-over-year core PCE

inflation by 0.05-0.1pp in May and 0.1-0.2pp in December. We think that the software

and accessories contribution to year-over-year core PCE inflation will remain overstated,

by about 0.1pp in May, 0.3pp at the peak later this year, and 0.25pp in December (vs.

0.15pp/0.45pp/0.35pp under the current methodology), though this depends in part on

how sensitive the new PPI inputs will prove to the recent memory price spike.

1 Gerner, Thesia, George Janini, William Passero, Laura Paszkiewicz, and Mark Vendemia. “The CE and PCE: A

Comparison,” Monthly Labor Review September 2006.