Is inflation getting better? The answer, in charts

Even though we did a blog post about inflation as recently as February 2022, it's still a hot topic (unfortunately) three months later. So, we figured it would be worth revisiting by focusing on a key question at hand: "How do we know when inflation is getting better?" The post Is inflation getting better? The answer, in charts first appeared on Blog.

Is inflation getting better? The answer, in charts

Even though we did a blog post about inflation as recently as February 2022, it’s still a hot topic (unfortunately) three months later. So, we figured it would be worth revisiting by focusing on a key question at hand: “How do we know when inflation is getting better?”

To answer, we must first ask how inflation—the year-over-year (YoY) change in the Consumer Price Index (CPI)—has changed from one month to the next, which is exactly what the following chart addresses, starting from January 2020.

As you can see, there was a small drop in the inflation rate in April 2022 (compared to March), and the biggest month-over-month increases occurred in early 2021. Things stabilized a bit over July, August, and September of last year, but then increased again in the fall.

The above chart will continue to update each month, allowing you to quickly see if inflation is, in fact, getting better. You can use the drop-down filters to examine specific geographies or categories of goods.

To answer what is likely to be your next question—”Ok, inflation has improved a bit, but what categories are actually driving that change?”—we use the following bullet chart, where the dark blue bar indicates the percentage for the current month, the light blue hash (bullet) indicates the percentage for the prior month, and the categories are sorted by the change from the prior period (represented by the distance between the bar and the bullet) so the biggest changes show first:

Using this chart of Top Categories, we can see that, in April, “Fuel oil and other fuels” and “Public transportation” continued to see increasing inflation while “Transportation” and “Motor fuel” came down from highs in March. Looking at the other chart (Detailed Categories), we see that “Admission to sporting events” has decreased YoY and both “Car and truck rentals” and “Used cars and trucks” have started to see their inflation rates decrease. The price of eggs, however, continues to go up.

The last construct we can look at to understand if inflation is getting better (or worse, for that matter) takes from a popular retail metric: the “two-year stack,” which is calculated by adding the YoY change to the YoY change from the same period last year. (There is a whole mathematical debate on whether you should really calculate a CAGR, but sometimes simple wins out).

Using this approach, the final chart (below) shows inflation rates for both this year and last year, with the gray bars showing the month-over-month totals. This estimates the total impact compared to two years ago—which, unfortunately for us today, was a much better place to be as far as prices go.

The post Is inflation getting better? The answer, in charts first appeared on Blog.