Among the more robust debates about whether Fed policy is jumping the gun, or falling behind, is whether inflation is increasing.
The Wall Street Journal’s Josh Zumbrun has caught some interesting evidence suggesting that in fact inflation has been higher than what the Fed’s been telling us.
Now normally, arguments against official numbers are pretty specious. There are a lot of cranks questioning the inflation data.
But this time is different…
It comes from the State Street PriceStats index. It’s been using tons of online data to measure inflation, and its correlation with the government’s official measure has been nearly impeccable.
Until recently. Starting in Q4, the two measures began to diverge. Q4, of course, saw extreme winter weather that everyone agrees likely caused the economy to slow. While the official measure of inflation climbed 1.5% in March YOY, the PriceStats model showed it climbed 2.5%.
What happened? Online retail, it seems — which the official measure would not have picked up, and which would have surged as people stayed inside.
“…What’s happening is less sinister and more interesting, according to Jessica Donohue, the senior managing director at State Street who helps oversee the index,” Zumbrun writes. “The gap could be explained by bad weather, and the superiority of online data in measuring commerce that increasingly takes place over computer screens, not cash registers.”
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