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Long-term linear trends in consumer price indices

  • Kitov, Ivan
  • Kitov, Oleg

Headline CPI, core CPI and indices for various expenditure categories were analyzed. Long-term linear trends have been found in the difference between the core CPI and the headline CPI in the USA. Duration of these periods is different for positive (18 years) and negative (8 years) trends, and the trends change to opposite during some shorter time intervals of 2 to 4 years. The difference between the core CPI and the index for energy is similar to that between the core CPI and headline CPI. The index for energy will reach the core CPI in 2008, however. Then, one should not expect further increase in energy price beyond that dictated by the CPI. It is likely that oil price will be falling in absolute terms. The difference between the core CPI and the index for food also has two linear branches after 1980, but the slope of the current trend is weak and the difference will intercept zero line only in 2014. The difference between the core CPI and the housing index is characterized by an almost constant duration of negative and positive branches – approximately 11 years. The current period of negative slope in the difference will approach its turning point in 2008 or 2009 and is characterized by very high volatility. The next trend has to be positive, i.e. the housing index will be growing at a lower rate than the headlining CPI. The difference for the transportation index had a longer period of positive slope – between 1980 and 2004. During this period the difference reached the level of 30 units of index. Currently, a turning period is observed and a negative slope is developing. The difference related to price indices allows to accurately predicting the evolution of relevant stock market indices.

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File URL: http://mpra.ub.uni-muenchen.de/6900/1/MPRA_paper_6900.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 6900.

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Date of creation: 27 Jan 2008
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Handle: RePEc:pra:mprapa:6900
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  1. Ivan O. Kitov & Oleg I. Kitov & Svetlana A. Dolinskaya, 2008. "Relationship between inflation, unemployment and labor force change rate in France: cointegration test," Papers 0811.0896, arXiv.org.
  2. Kitov, Ivan, 2007. "Exact prediction of inflation and unemployment in Germany," MPRA Paper 5088, University Library of Munich, Germany.
  3. Kitov, Ivan, 2007. "Exact prediction of inflation and unemployment in Canada," MPRA Paper 5015, University Library of Munich, Germany.
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