Economists and traders are use this inflation barometer in real-time to stay ahead of the curve
You may easily find out the current value of a publicly listed firm by looking up its market cap, which changes continuously throughout the trading day.
May saw a slowdown in inflation, which bodes well for consumers
However, there are two official reports that reveal the rate of price increases in the US on a monthly basis: the Consumer Price Index and the Personal Consumption Expenditures price index. Like September’s inflation statistics, both are subject to delays, revisions may be made months later, and the possibility of an ongoing government shutdown can render them useless.
In spite of these caveats, the Federal Reserve uses these reports to inform important monetary policy decisions, which in turn affect the interest rates you pay on various forms of debt, including your mortgage. Your Social Security benefit amount and, most likely, your salary are both affected by the government-mandated inflation rate.
While official government inflation data has been the gold standard for a long time, a new real-time inflation measure called Truflation is attempting to address some of the flaws with this data.
Truflation lacks access to many categories that the government data covers, such as education and health care costs, which are significant for many Americans. However, having constantly updated inflation data is crucial. Government inflation reports have also been produced for a long time and adhere to very rigorous requirements.
The process
In contrast to PCE and CPI, Truflation calculates a fresh inflation rate almost every day by aggregating three sets of prices for over 18 million items and services from more than 60 separate data sources. There are a number of sources for this data, including Zillow, Amazon, Walmart, Nielsen, and Hilton.
In order to compile monthly CPI reports, the Bureau of Labor Statistics—which is part of the Labor Department—hires a team of individuals to either visit businesses, contact them by phone, or scan their websites in order to gather pricing data for 80,000 goods and services nationwide. Truflation contributes financially to this data collection process.
According to Truflation’s CEO and creator Stefan Rust, who spoke to CNN, an increasing number of suppliers have been freely contributing data since they know that their pricing information would be more accurate and up-to-date if it’s included in the model.
In its publicly available 20-page methodology, Truflation details the arduous procedure that data goes through to ensure its legitimacy by using blockchain technology.
Reasons why the current state of the economy is causing so much frustration among Americans
In order to reflect the distribution of income across categories for the typical consumer, Truflation, similar to PCE and CPI, gives relative relevance values. Housing gets more weight than, say, clothes since it comprises the bulk of most customers’ purchasing. For this reason, even modest increases in the cost of housing may have far-reaching effects on inflation as a whole.
To find out how people spend their money, truff inflation follows the same procedure as the government when determining significance, but it utilizes different data. The discrepancy between Truflation’s inflation figures and those released by the government may be somewhat explained by this.
Another difference is that the government’s monthly data is adjusted for seasonal factors, whereas Truflation’s data is not. Since cooling a house in the summer is usually more costly than heating it, a rise in utility bills during that time would be more pronounced in Truflation’s statistics compared to the government’s.
On Wednesday, the national inflation rate was estimated by Truflation to be 2.23%, which is quite close to the Federal Reserve’s objective of 2%. On the other hand, the consumer price index (CPI) for May was 3.3%, as projected by Truflation using its data, and this number was confirmed in Wednesday morning’s publication of the report. By synchronizing their data with the government’s release of its monthly inflation figures, Truflation is able to anticipate the results that will be shown in those reports.
Application of Truflation Data
According to Rust, the first interest in Truflation came from Wall Street speculators. “They were hoping that our data would shed light on where they thought the government’s BLS numbers would fall.”
Former Dallas Fed president Richard Fisher advisor and current CEO and chief strategist at QI Research, Danielle DiMartino Booth, indicated that she utilizes Truflation “to identify where price pressures are cropping up” every day. According to Booth, who spoke with CNN, this provides her a “better feel” for the situation on the ground than the statistics provided by the government.
The Federal Reserve has recently shown more interest in accessing non-government sources for economic data in order to inform its views on the economy, but whether or not they are using Truflation data is unclear. Still, according to Rust, who claims to have spoken with Fed scholars in both New York and Dallas, the matter is being considered.
