2020
Working Paper
HBS Working Paper Series

Inflation with COVID Consumption Baskets

Format:Print
| Language:English
| Pages:22

Abstract

The COVID-19 Pandemic has led to changes in expenditure patterns that can introduce significant bias in the measurement of Consumer Price Index (CPI) inflation. I use publicly-available data on credit and debit card transactions to update the official CPI weights and re-calculate inflation with COVID consumption baskets. I find that the US CPI underestimated the COVID inflation rate, particularly during the first three months of the Pandemic, as consumers spent relatively more on food and categories with higher inflation, and less on transportation and other categories experiencing deflation. By September, U.S. COVID inflation was 1.90% compared to 1.41% in the official CPI, and was impacting low-income households the most. I also find evidence of higher COVID inflation in 12 out of 19 additional countries.

Keywords

COVID; Consumer Expenditures; CPI; Inflation; Health Pandemics; Consumer Behavior; Spending; Inflation and Deflation; Global Range

Citation

Cavallo, Alberto. "Inflation with COVID Consumption Baskets." NBER Working Paper Series, No. 27352, June 2020. (Revised October 2020. Harvard Business School Working Paper, No. 20-124, May 2020)