- by New Deal democrat
Since July, I have been using the change in the price of a gallon of gas as a simple method to forecast that month's CPI in advance. My point has been, that all you really need to know about inflation is the price of gasoline. So far each prediction has turned out to be within 0.1% of the actual number.
For October I predicted a decline of -0.1%, which was the actual reported result, making the YoY inflation rate +0.9%, also exactly as predicted:
On Monday the E.I.A. reported gas prices for the final week of November, so we can estimate November's inflation rate now. My method is to take the change in the price of a gallon of gas and divide by ten, then add 0.1% to 0.2% to account for core inflation, or else divide by 16 to be more conservative, to arrive at the non-seasonally adjusted inflation rate.
In October the average price of a gallon of gas was $3.34.4. This month it was $3.29.7. That is a -1.4% decline. Whether we divide by 10 or 16, the rounded result is -0.1%, and adding 0.1% to 0.2% gives us a flat 0.0% change.
The seasonal adjustment for November last year was +0.3%. This gives us a final seasonally adjusted inflation rate that rounds to +0.3%.
That will replace last October's +0.0% inflation rate, so that the YoY inflation rate will be approximately +1.2%.
This inflation rate remains subdued enough to suggest that real YoY wages have probably increased again in November, although the monthly change is likely to be slightly negative:
Note, graph above is though October.
