Inflation Sensitivity to COVID-19

This page is no longer being updated and will be discontinued as of September 30, 2023.

Inflation Sensitivity to COVID-19 updates data on the contributions to core personal consumption expenditures (PCE) inflation by the degree of sensitivity to the economic disruptions caused by the pandemic. The decomposition is based on the methods described in Shapiro (2020a, b).

The PCE measure of U.S. inflation is considered particularly useful for identifying underlying inflation trends. It tracks the change in prices of a particular basket of goods and services purchased by consumers throughout the economy. The “core” measure excludes food and energy products, whose prices tend to be volatile.

The data on this page divide the categories of core PCE inflation into sensitive and insensitive components, as shown in Chart 1. COVID-sensitive components include those categories where either prices or quantities moved in a statistically significant manner at the onset of the pandemic, between February and April 2020. COVID-insensitive components include all other core PCE categories. Details of the methodology are described in the downloadable data files and Shapiro (2020b).

The second chart further decomposes the COVID-sensitive category into portions that are sensitive to demand effects, supply effects, and those with ambiguous sensitivity. Demand-sensitive categories are those categories where quantity and price changed in the same direction between February and April 2020, both at a statistically significant level. Supply-sensitive categories are those in which quantity and price changed in opposite directions, both at a statistically significant level. The ambiguous category includes those sensitive goods or services that experienced a statistically significant change in either quantity or price, but not a statistically significant change in both quantity and price.

Chart 1: COVID-Sensitive and COVID-Insensitive Contributions to Core PCE InflationPanel A: Contributions to year-over-year core PCE inflation

Panel B: Contributions to monthly core PCE inflation at an annualized rate

Chart 1 shows the contributions to core PCE inflation divided between those that are sensitive and insensitive to economic effects of COVID-19. Panel A shows the contribution to year-over-year core PCE inflation. Panel B shows the contribution to monthly core PCE inflation.

Chart 2: Supply-Sensitive and Demand-Sensitive Contributions to COVID-Sensitive Inflation (year-over-year)

Chart 2 shows insensitive inflation and a breakdown of the portion of core inflation that is sensitive to COVID-19 according to whether it reflects supply-sensitive categories, demand-sensitive categories, or ambiguous sensitivity.

References

Shapiro, Adam. 2020a. “Monitoring the Inflationary Effects of COVID-19.” FRBSF Economic Letter 2020-24 (August 24).

Shapiro, Adam. 2020b. “A Simple Framework to Monitor Inflation.” FRB San Francisco Working Paper 2020-29. https://doi.org/10.24148/wp2020-29

Download Data

Inflation Sensitivity to COVID-19 (Excel document, 41 kb)

For related data on core personal consumption expenditures, see Cyclical and Acyclical Core PCE Inflation.