Publications
Publications
- June 2024
- IMF Economic Review
Inflation with COVID Consumption Baskets
By: Alberto Cavallo
Abstract
The Covid-19 pandemic led to changes in expenditure patterns that introduced significant bias in the measurement of Consumer Price Index (CPI) inflation. Using publicly-available data on card transactions, I updated the official CPI weights and re-calculated inflation with Covid consumption baskets during 2020. I show that the U.S. CPI underestimated the Covid inflation rate, as consumers spent relatively more on food with positive inflation, and less on transportation and categories experiencing deflation. The bias peaked in May, when US Covid annual inflation was 1.02% compared to just 0.13% in the CPI and low-income households were experiencing nearly twice as much inflation as those at the top of the income distribution. I find similar evidence of higher Covid inflation in 14 of 19 additional countries.
Keywords
COVID; Consumer Expenditures; CPI; Inflation; Consumer Behavior; Inflation and Deflation; Health Pandemics
Citation
Cavallo, Alberto. "Inflation with COVID Consumption Baskets." Special Issue on The Global Economy: Looking Back, Moving Forward, Part II. IMF Economic Review 72, no. 2 (June 2024): 902–917.