Taking a longer view of CPI trends

Doug Short has now posted some longer views of the Consumer Price Index CPI to complement those published by the Bureau of Labor Statistics (BLS).  This provides additional context to help us think about what the latest numbers mean.

Here's his view of the data since 2000 with the shaded area from 1.75% to 2.00% representing the Core (CPI less food and energy) target rate for the Federal Reserve. 

http://advisorperspectives.com/dshort/charts/inflation/headline-core-comps.html?CPI-headline-core-since-2000.gif

UPDATE 20 September 2011

With the benefit of this 12 year view, we can now put the 1 year view from BLS into better perspective.  For example, we can see the headline value of 3.7% (in red) is now back up into it's 2004-2007 range following a 2 step process which looks like a reversion to mean process.  Will it overshoot? we can't tell?  We also see that the CORE CPI (in blue) looks like it is reverting to the mean of the past 12 years.  

And here's Doug's  really long view since 1957.

http://advisorperspectives.com/dshort/charts/inflation/headline-core-comps.html?CPI-headline-core.gif

UPDATE 20 September 2011

In this much longer view, some further nuances come into view including the obvious 3 peaks of inflation in 1970, 1975, and 1980, the much lower inflation rates from 1960 to 1965. We can also see how the Headline CPI and the Core CPI are more likely to diverge from each other after 1985.  We also see the CORE rate showing a steady decline since 1990 that was not matched by the Headline CPI.

Doug also has some charts showing the PCE (Personal Consumption Expenditure) Index and the Core PCE Index as shown below since 2000.:

http://advisorperspectives.com/dshort/updates/CPI-Headline-and-Core.php

Check out Doug's original post for additional details.

We will keep our eyes open for other alternatives view of these metrics that get posted today.

S&P 500 - Comparing nominal vs inflation adjusted performance

Hat tip again to Barry Ritholtz for this nice chart.

It's kind of interesting that almost all other economic metrics get adjusted (normalized) for inflation (e.g. GDP and hourly wages) but that we don't apply the same scaling adjustment to our stock market indices.

The long time scale for this chart makes it even more interesting. Note the devastation of the 1970s and how the inflation adjusted value has not yet recovered to its year 2000 peak.

Graph Showing Public Opinion During World War II

Hat tip to Josh Marshall over at TPM for his blog post with the link to this excellent, easy to read, hand drawn trend graphic showing public opinion during World War II.

This chart shows the complete time range and multiple relevant factors in enough detail that the trends for each factor can be readily discerned. The use of event labeling on the Top X axis adds to the value and usefulness of this chart.

St Louis Fed July 2007 National Economic Trends

The latest collection of charts from the St. Louis Fed highlighting National Economic Trends where they continue in their tradition of presenting both extended time periods and shorter intervals. This easy to download document is a good example of how it is possible to present high degrees of multi-dimensionality covering a wide range of the most important indicators, all in a single, easy to use, easy to read format.

Ten Trend Charts from the DoD Quarterly Report

The Dept of Defense has just published its mandated quarterly report to Congress on the situation in Iraq - Measuring Stability and Security in Iraq, June 2007 (51 pages). As they state in the Executive Summary, the "report includes specific performance indicators and measures of progress toward political, economic, and security stability in Iraq"

Included as part of the report are 10 static trend graphs which I have reproduced in this post. You can click on each for a full size image. If you would like all 10 JPG images so you can look at full size with your favorite slide viewer, you can download this zip file.

Most of the important performance indicators mentioned in the report did not rate their own static trend graph chart. As we did with the UN document and our scan of recent news articles, we plan to comb through the document and come up with a list of indicators that complement the ones we have already highlighted so as to get a sense of the breadth of important indicators that are already on our radar screen.

Chart 01 - Oil Production - too short a time span. Also missing data for May 2007.


Chart 02 Electricity - Missing data for April and May 2007.



Chart 03 - Sectarian Murders and Incidents . Missing data from May 2007. Weekly data might be important to look at.


Chart 04 - Weapons Caches Found - This is looking promising. Access to weekly and daily data could be even more revealing of ongoing trends. Missing data for May 2007.



Chart 05 - Average Weekly Attacks - Missing last 5 weeks of data. This is the source for the charts that appeared in WaPo and NYT as reported earlier today.

Chart 06 - Average Daily Casualties - Missing last 5 weeks. Bar chart format with three trends makes reading trends for Iraqi Security Forces and Coalition more difficult.


Chart 07 - Hotline Tips - Interesting new performance metric. Looks positive. Missing past month of data. Weekly or daily data reporting could be even more revealing.


Chart 08 - Confidence in Iraqi Government to Improve the Situation. This looks surprisingly to me for its stability over time. I will need to read the text about this in detail. Missing most recent month's data.


Chart 09 - Assessed Capabilities of Police - Difficult to interpret trends when only two data points per item. Stacked bars make interpretation more difficult and time consuming. This is an interesting new metric and it could benefit from higher resolution, near real time reporting.


Chart 10 - Ministry of Defense Forces Assessed Capabilities. This chart also presents some important data but suffers from same failings as previous chart - only 2 data points per indicator, stacked bars are hard to read.


Summary. 10 Static charts covering a range of important indicators is more than almost anyone else except Michael O'Hanlon produces when it comes to highlighting the important trends evolving in Iraq.

So that's definite plus. Someone who spends a few minutes can examine all 10 of these (especially if they can scroll in slide show mode on full size images using this zip file).

On the minus side, the missing last month or last 5 weeks of data is a serious drawback. Many of the charts can be improved on and made more readily useful to ordinary viewers by applying some trend chart best practices principles. These include

• use of full time range
• use of near real time reporting for the most recent interval
  
• selection of best resolution or choice of several different reporting intervals (day, week, month)
• displaying each important indicator separately with appropriate Y axis scale
• having sufficient data points for trends to be discernible - 2 is way too few
  

And worst of all, most of the important indicators have no charts at all and are only discussed in text or in tables showing the current values.

The indicators in this report are important, but this method of presentation falls short of ideal and short of what is needed and what indeed is possible. With the high number of factors discussed in this report, the only method that will actually make this kind of trend data usable to its intended primary audience (Congress) and to the secondary audiences including the media and ordinary interested citizens would be to deliver this data via a 21st century Trend Visualization Appliance.

GAO May 15 Rebuilding Iraq Report

Here's a link to the recent General Accounting Office Rebuilding Iraq Report - May 15, 1007.

Once chart I found enlightening and eye opening was their oil chart showing history covering the range of 1970 to 2005. [Click for larger image]

I also found the enemy initiated attack chart easily digestible although as I have commented before, I am not a huge fan of stacked bar charts unless there is also an easy way to look at the individual indicators.

Applying Trend Analysis Principles with Brilliant Effect

Buying a camera at a fair price is not particularly earth-shaking activity, especially compared to trying to figure out whether our actions in Iraq are helping or hurting.

Nevertheless, here is a simple and striking example of the power of applying the essential principles of trend analysis to the task.

Pricescan.com did a brilliant job on this in my opinion.

The red trend line represents the high price, the blue the average price, and the green the low price. Each tick mark on the X axis represents one week's time and the chart covers the period from 9/11/2006 through 6/4/2007

What did pricescan.com do right

1. they identified the most important factors (in this case the minimum, average, maximum price for the Canon PowerShot AS710 IS camera.
   
2. they collected the raw data each week of the price of this item from a range of sources
3. rather than showing the raw data, they created calculated values of High, Average, Low price for each period
4. They selected a reasonable reporting rate that fit with the data (1 week in this case) and the resulting trend lines are relatively smooth while still giving us enough data points to have confidence in our understanding of the trends we see developing. A total of approximately 38 data points are plotted for each factor.
5. their Y axis scaling fits the data and makes it possible to see the trends in all three indicators that they displayed. The scale values are also easy to read.
6. they are reporting their data in near real time. The most recent data point is only 5 days ago.
   
7. They showed the entire time period ( I am guessing from product introduction right up through last Monday)

And of course, they visualized this data for us rather than telling us about it or showing us a table of 100+ numbers.

Armed with this easy to read chart, anyone interested in purchasing the Canon PowerShot AS710 camera in the next week or so will know whether the offering price is within a reasonable range and can then get on to evaluating the other factors that might impact their buying decision.

This example stands in stark contrast to the most approaches to other important areas of our lives as exemplified in yesterday's Iraq Forecast post. There are no mushy metrics or imprecise quantification or flowery metaphors. There's no postponing the moment of truth cop-outs saying we don't know exactly what the future will bring. Of course we don't know exactly. We never do.

They don't say: "we can't really tell you whether the price of this item is going to become more affordable by September".

There's just the relevant facts that help deal with the specific situation.

My two cents: the better we learn how to apply this kind of approach to the most important problems in our lives, the quicker we will begin to gain control of what's happening.

Timelines in the News - Deja Vu

Here's a post on Electric Goalposts from Matthew Yglesias from December 8th, 2004 commenting on the electricity trends contained in the State Departments Weekly Iraq Status Report dated December 1st, 2004.

The money quote is:

But for goalposts purposes, let's note that we are not now at the goal, have never been at the goal, and are not even moving in the direction of the goal. Instead, Iraqis have less electricity (but way more phone lines, interestingly enough) than they had before the war.

Here's the chart from December 1, 2004 followed by the one from May 30th 2007. Not much seems to have changed in the intervening 30 months.


I found the commentary added into the first chart to be most helpful and useful as an aid to understanding what was really happening. A picture is worth a thousand words but even so, many time a few extra words can add even more value.


Both these charts rate high because they show a complete time range. Of course, it would sure be interesting to see what the Iraqi electricity chart looked like starting back in 1980 so that the effects of the first Gulf War when, if memory serves, severe damage was done to the Iraqi infrastructure. It would be useful to compare the recovery or non-recovery following that war to the current recovery. If anyone has that data, please let me know.

Iraq Weekly Status Report May 30, 2007

Here are some charts taken from the Department of State's May 30th, 2007 Iraq Weekly Status Report.

This first chart covers from January 2004. It appears as if demand is rising while production is falling and cannot seem to crack the 100,000 mark.

Also notice the sharp downward spikes for the light blue daily supply data. This tells me that it would be worthwhile to be able to zoom in on the supply factor and look at how supply is changing over time but using a much higher resolution than daily. An hourly trend chart for month's worth of data, or a daily chart using a 1 minute resolution would surely reveal some insights not currently available.

Similarly, when an aggregate trend factor show such sharp variation, it is frequently the case that creating additional trend charts that dis-aggregate the data can prove most helpful in understanding more fully what is happening.


This second chart makes it clear that the Iraqi currency has strengthened relative to the dollar over the past 12 months.


This third chart clearly shows the rising trend in Iraqi Commercial Bond interest rates over the past year.

This fourth chart suffers from showing far too brief a time period of only the most recent 10 weeks. Contrast this to the Oil Production chart in the previous post that showed the past 4 years and also provide useful trend data for production from the North and from the South.


This chart also has a much short sweep of time than needed for understanding the underlying trends. The related chart in the previous post showed refinery trends going back 4 years. This chart does have the positive feature that it groups all the bars for a given type of refined product together which is an improvement over the way the bars were used in the previous post from the Reconstruction report to Congress.


It's curious to note that there are no trend charts in this report from the State Department that show trends related to the first two "key areas identified as pillars of US government policy for victory in Iraq." Namely,

1. "Defeat the terrorists and neutralize the insurgents"
2. "Transition Iraq to security self reliance."
   

The trends in these areas are however dealt with in Michael O'Hanlon's weekly report from the Brookings Institution. We will be commenting on the May 30th version of that excellent report in our next post.

The Big Picture | Some More Housing Charts

Barry Ritholtz does it again with this excellent post which contains 4 excellent and easily readable charts on the trends affecting the housing market.

This time, Barry tells the story using pictures without commentary. The charts he selected are excellent and speak for themselves without commentary. However, Barry always adds something to the mix when he adds in his thoughts and perspectives and experience on what he sees in the charts and what it is most likely to mean.

Barry does give us a money quote with these few words to wrap up his post:

Funny thing: The charts tell pretty much the same story the words did: The housing story is only halfway done, going to get worse as time progresses. We are not anyway near a bottom in Residential Real Estate.

I do miss the words, so here are copies of the charts accompanied with my ordinary citizen, non-housing-expert comments on what they might be telling us and focusing on the degree to which these charts make best use of best practices for conveying trend results graphically.

This first chart is both interesting and scary. It would have been great to see what the Reset Amounts have been for the past 10 or 20 years rather than just the past 4 or 5 months. If I am reading this correctly, it sure looks like we are into a 12-18 month period with extremely high reset amounts, where a very small percent are for Prime ARM. Note that this chart is originally from Credite Suisse via Lamont Trading Advisers to At These Levels and then to The Big Picture.

Stacked bar charts are often difficult to use to interpret the behavior of the sub components such as Unsecuritized ARMs. Important trend information about these sub factors may be hiding in a chart such as this. My own preference in these cases is to use individual charts for each factor that I consider important so I can understand the individual behavior AND the composite behavior of all these factors.

This 3 year chart originally from Northern Trust is plain as day. Having the 20 or 25 year chart for this same key factor would have made this even better and clearer and more useful. Some smoothing, maybe a 3 month average could also be helpful here. It's important to note that this chart is based on combining two other factors - the actual total inventory of homes, and the most recent rate of sales of existing homes. For reference, having charts for these other two factors to look at in parallel to this calculated metric would also be useful.


This next chart gives us a nice 20 year view. having a complementary 3 year view would let us look more closely and better understand the very sharp recent spike.


For this next chart, my own preference would be to look at these two factors separately on their own chart first using a 20 to 25 year view.



As a general comment, having a shifting time window for every chart makes things much more difficult on the viewer.

Housing Freefall Continues Unabated

You can find some more good charts and commentary on Housing from Barry Ritholtz over at The Big Picture.

Here's the first chart. You won't be surprised to learn that I like the long time sweep. However, this also looks like a case where having a second, shorter term chart - maybe for the past 3 years would help us better understand the more recent behavior


In contrast, the second chart shows just the 3+ year view and presents that very well. Having a 20 year year to match the first one would have been even better.

The whole article is worth a read for the extra perspective it brings.

St. Louis Fed - National Economic Trends - June 2007

The newest edition of the always excellent National Economic Trends is available today from the St. Louis Fed.

Here are a sampling of the charts that caught my eye. Click for larger size version.

From their engaging cover article, this first chart shows the percentage of the population age 55 or over engaged in part time employment. The upward trend for women is particularly clear. The article discusses possible causes and notes areas for follow-up investigation.


This next chart shows trends in national income as a percentage of GDP.

Corporate profits weighs in at almost 14% of GDP and is close to the recently set 25 year highs. This is approximately double where it was in 1982.

Proprietor's Income registers at almost 9% of and it also is close to its 25 year highs. This is almost 50% higher than it was in 1982.

Compensation at a little over 64% of GDP is close to its 25 year lows. This is down approximately 3% from the 67% level of 1982.

The remaining National Income components (not shown) must by deduction be down net 7% from about 20% to 13%.


This third chart shows pretty clearly that the rise in corporate profits before tax is directly reflected in the rise in after tax profits as a percentage of GDP. After tax profits have more than doubled since 1982 from 4% to over 8%.


The fourth chart shows that the current account balance is close to its 25 year low at approximately 6% of GDP. Note the striking and steady downward trend since 1991.

And this final chart is noteworthy for the clarity with which it shows the rise of debt service payments to approximately 14.5% of personal income - close to the highest levels in 25 years. The steady upward trend since 1992 is also clearly visible.


Commentary.

1. As I mentioned in previous posts, one of the reasons that I value the St. Louis Fed's monthly National Economic Trends report is their use of long term trends. These help put the current behavior into perspective. The charts I have selected offer a glimpse at how a 25 year trajectory adds understanding to the most recent behavior.

2. That's not to say that their monthly report couldn't be improved. Here's my short list of suggestions on just how that might be done.

• Show all selected factors using the same long term 25 year time frame trend chart as the default setting and template.
• Show each factor on its own before combining it with other factors in a dual chart. The dual chart approach while extremely helpful for showing the possible relationship between a set of factors and simplifying comparison sometimes obscures the underlying trend in some of the factors due to the Y axis scaling used.
  
• For the single charts created for each important factor, consider using MIN-MAX scaling for the Y axis rather than zero based scaling as the default. This is not correct in every instance but it often proves useful in helping make the trend patterns easier to read and understand.
  
• Add at least some minimum commentary (could be 25 words or less) with 20% of each month's set of charts. Add comments for the charts that the St Louis Fed considers to be the most interesting and which have some interesting pattern to observe. E.g. follow the example we have set with the selected charts above. A picture is worth a thousand words, but not every important nuance seen by the expert creators of these charts will register immediately with every viewer, especially to non-expert viewers.
  
• Make it easy to download a cross-tabulated table of all the data contained in all the charts for further examination by interested parties.

Latest Brookings Iraq Index - Key Factors for Gauging the Success of the Surge

Here's the link that will always get you to the latest edition of the highly useful Brookings Institution Iraq Index that is one of the best places that I know of for learning about the trends on the ground in Iraq.

In the April 30th, 2007 edition, there is a useful essay on "Tracking the Surge" on page 4.

Unfortunately, the charts and tables that follow for the most part do not match up with the key factors noted in the essay, nor do they make it easy to for interested citizens to see the trends at work for themselves.

Here are some of the key factors that I gleaned (scraped) from the text.

1. number of US brigades in place
2. number of "joint security stations" established
3. extra-judicial killings
4. level of civil warfare
5. willingness of Shia militias to lie low
6. willingness of Sunni tribal leaders in al-Anbar to collaborate in opposing al Qaeda
7. level of violence in al-Anbar
   
8. daily attacks in and around Ramadi
9. resilience level of al Qaeda and related terrorist elements
   
10. rate of use of vehicle bombs
11. rate of use of vest bombs
12. percentage of casualties that are Shia
13. progress on the hydrocarbon law through the Iraqi parliament
14. progress towards reforming de-Bathification to allow return of lower level Baathist to public life
15. state of the Iraqi economy
16. Oil revenue received
    
17. Foreign aid received
    
18. Money available in federal coffers
19. Performance level of public utilities (presumable electricity, water, sewerage, sanitation, petrol supplies, public transportation)
20. How well schools are functioning
21. The overall state of the health system infrastructure
22. Level of unemployment

That's an awful lot of important metrics for one page of text and Michael O'Hanlon and the Brookings Institution deserve praise for consistently working to get their arms around the vast multi-dimensional range of factors at work.

And, reviewing the whole report, there are literally dozens of other important factors that show up in charts or tables.

Wishlist 1: It would be really valuable if one could turn the page of the Iraq Index report and see the chart or charts for each of the these items one by one, in the same sequence as they appeared in the essay and with the same terminology, so as to get a sense for the degree of progress that is being made, to see which things are lagging, to see what is getting worse and by how much, and so on.

This, in my mind would provide a giant step upward in the usability and the understandability of the important work that provides the basis for these weekly reports.

Comment: Many of the tables and charts in the weekly report are out of date. They represent important factors but no new data has been available to update them for quite some time.

Wishlist 2. It would be helpful if outdated tables and charts were either placed in an appendix, or if the chart could be updated to show the current end date and the missing data. Otherwise it is easy to misread the right hand side of the charts to think that the data and the trends represent the past few weeks or months instead of sometime in June 2006, or May 2005.

Comment: The chart formating for just about every chart is different and each chart seems to have its own unique starting and ending time intervals.

Wishlist 3. A move to more consistent chart formats and time intervals would greatly enhance the readability and usability of these reports.

BLS Compensation Report

The latest Bureau of Labor Statistics report on wages and benefits includes these relatively easy to read charts that highlight the employment compensation trends over the past 6+ years. The moderately long time frame makes it easy to detect patterns and compare recent behavior to the situation at the turn of the century.



With the second chart, using the non seasonably adjusted numbers for the percent change over 12 months makes a lot of sense.

The red lines in the 2nd and 3rd charts plot the same metric. The blue line converts those wage gains to constant dollars and makes pretty clear how little this has changed over the past 6 years.

It would have been nice to see the total compensation chart including wages and benefits adjusted to constant dollars.

Monthly trade deficit

Another great chart from Calculated Risk

You can find the full post here

Chart of the Day - www.chartoftheday.com

Here's another nice chart from Chart of the Day - www.chartoftheday.com

On the plus side we have the complete time range and the use of the derived value of the inflation adjusted DOW as the variable to watch rather than the Headline raw DJIA value. In my view, the inflation adjusted number really should be the Dow value that we watch for the same reasons that we use inflation adjusted numbers everywhere else.

Historical Bear Market Contractions

Barry Ritholtz continues his track record at finding and sharing interesting and useful charts that provide new perspectives at looking at important data. You can find the full post at:
The Big Picture Historical Bear Market Contractions

I liked the creative way that the width of the bars in this chart shows the second dimension of length of the contraction period.

The Importance of Mortgage Equity Withdrawal (MEW)

Another hat tip to Barry Ritholtz in his post on The Big Picture The Capital Commerce Debate this time highlighting some eye opening and vital data about MEW (Mortgage Equity Withdrawal) using charts from courtesy of CalculatedRisk.

You can find a very recent Calculated Risk article here with comments on the debate between Barry Ritholtz and Don Luskin and a clarification of the meaning of the second chart here.

Digging into the Job Opening Data

As mentioned in the previous post, the Bureau of Labor Statistics makes detailed trend data available on all the key Job Opening and Labor Turnover Survey (JOLTS). You can take a look yourself at the BLS data page and then scrolling down to select one of the option buttons (e.g. for most requested statistics) for Job Openings and Labor Turnover Survey.

You can set the time period for the trend graphs created to be the entire time since the year 2000 that JOLTS data has been collected. Here are a few examples. It's somewhat puzzling to me why the Openings rate seems to be going steadily up from 12/2003 onward while the Hiring rate stays steady beginning around 12/2004.





There's a ton more data at the BLS web site. The biggest difficulty for me and I bet for others is just how time consuming and inflexible the BLS' trend visualization application (TVA) is to work with.

Another Easy to Read Housing Chart

Here's another easy to read chart that I find attractive from Political Calculations' post on the Boom in Realtors. The long time sweep creates excellent perspective. It would be interesting to zoom in on the past 30 years for another view.