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Back to Abnormal: US Inflation Fears
Post-COVID, one way to assess the inflation normalization process has been to track the daily "News Volume Index" (NVI) in our inflation database.
The NVI measures the volume of news relevant to near-term inflation forecasts, whatever their "sign". It can be taken as a proxy measure for inflation (or deflation) "fears" (perception or short-term expectations). The NVI is released alongside the NIPI.
From Q3-2022 on, the NVI has converged towards pre-COVID levels in the US, ahead of other regions.
That process came to end, at least temporarily, following the US election:
The US NVI suggests inflation concerns could be matching COVID levels - not exactly there, but that is a risk. The main factor has obviously been tariff threats, as shown by the item-level News Volume:
This shouldn't come as a massive surprise, but it is interesting to observe the concurrent jump in the NIPI (which results from positive inflation volume increase) and market inflation expectations:
This illustrates a common use case for the NIPI: as a crosscheck whether market inflation expectations align with inflation fundamentals, proxied by the NIPI, or whether there are other markets dynamics at play driving breakevens.
Such analysis can only be done with timely fundamental data, often challenging in the macro field, but is something the daily NIPI database (and the NVI and the other time series AMS produces) can help with.
As always, you are more than welcome to try and look by yourself at the data: feel free to reach out.
Read more on NVI: Loud and Clear: Combine Our NIPI (Direction) And NVI (Volume) To Spot Inflation Turning Points
Read more on News Balance: Introducing the "News Balance", Bespoke Inflation Series.
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