I accidentally came across this chart:
For the last couple of years, consumer expectations of inflation a year away exactly matches whatever the inflation rate is right now. In other words, it's completely useless.
7 thoughts on “Raw data: Consumer inflation expectations are completely useless”
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Sure seems to be humming along. Jobs still plentiful and service sector doing well.
Yes it is completely useless to do what Drum is doing.
But then that's not how expectations are used at all in econometric work, so rather like discovering a wrench is completely useless as a screwdriver.
Is there a correlation with Fox talking points at the time?
Aaaactually, since consumers by and large don't really have any idea what inflation actually is at any moment (as in, if you asked them what the headline number was, not many people would know)...
So the fact that people's "what will it be like in a year" answer can basically be read like "what is inflation right now" is kind of interesting.
I noticed that too and I am guessing they ask the question in a way that feed the current inflation rate to the person, like "current inflation is X%, how do expect the to change in 1 year".
How about expectations for interest rates? When money is cheap is it expected to remain cheap?
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