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Predicting the Consumer Price Index (CPI) using a potential new measure of
price inflation, Total National Inflation Measure (TNIM), over the course of
2023 in the United States

Preprint · April 2023

DOI: 10.13140/RG.2.2.14033.61288

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 Predicting the Consumer Price Index (CPI) using a potential

new measure of price inflation, Total National Inflation Measure

(TNIM), over the course of 2023 in the United States

Laurence Francis Lacey

Lacey Solutions Ltd, Skerries, County Dublin, Ireland

22 April 2023

Abstract

Introduction: A total national inflation measure (TNIM) has recently been developed as a

potential additional measure of US price inflation. CPI is a lagging indicator of price inflation,

whereas TNIM is a leading indicator. Lacey (2022) estimated that US CPI lagged TNIM by

approximately 15 months (𝑇𝑙𝑎𝑔) and provided initial predictions for year-on-year (YoY) US

CPI. The objective of this paper was to extend these YoY monthly US CPI predictions until

the end of 2023.

Methods: The methodology used is that of Lacey (2022). The time period investigated was

from the beginning of 2021 until (for predictive purposes) the end of 2023.

Results: the CPI growth rate (𝑣𝐶𝑃𝐼) increases approximately linearly with 𝑇𝑙𝑎𝑔-adjusted

𝑣𝑇𝑁𝐼𝑀 over the period 3Q 2021 to 1Q 2023. Using the approximate linear relationship

obtained, 𝑣𝐶𝑃𝐼 can be predicted from 𝑇𝑙𝑎𝑔-adjusted 𝑣𝑇𝑁𝐼𝑀. This then allowed the

predicted YoY monthly CPI values to be calculated until the end of 2023. The resultant YoY

monthly US CPI is predicted to be within the range 0% to 2% in 4Q 2023.

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Conclusion: Year on year monthly US CPI is predicted to be within the range 0% to 2% in 4Q

2023. However, these predictions are based on a series of assumptions. In particular, if the

interest rate increases by the US Federal Reserve over the period 2022/23 do not nullify

imported inflation (e.g., increases in imported energy costs) and the US wage / price

interaction over this period, then US CPI might be expected to decline at a slower rate than

that predicted.

Keywords: econometrics, statistical methodology, consumer price inflation, total

national inflation measure, CPI prediction

1. Introduction

A total national inflation measure (TNIM) has recently been developed as a potential

additional measure of US price inflation [1]. It is proposed that price inflation (as measured

by TNIM) will occur at any time when the growth of the broad money supply (as measured

by M2) is in excess of the needs of the underlying growth in the US economy (as measured

by GDP) [1].

CPI is a lagging indicator of price inflation [2], whereas TNIM is a leading indicator.

Lacey (2022b) [3] estimated that US CPI lagged TNIM by approximately 15 months. Using

the dynamic relationship between CPI and TNIM, Lacey (2022b) [3] provided initial

predictions for year-on-year (YoY) US CPI. These YoY predictions are compared to the

observed values in Figure 1.

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 Figure 1: Plot of the observed and predicted year on year (YoY) monthly US CPI over

the period 2021 until 1Q 2023

Observed vs predicted YoY monthly US CPI

10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
2021 2021.5 2022 2022.5 2023

YoY US CPI
Predicted monthly US CPI (using linear inter-quarter interpolation plus extrapolation)
Since end of 3Q2022

Note: YoY; year on year; CPI is the US Consumer Price Index

The initial predicted CPI values (red in Figure 1) were similar to those subsequently

observed (grey in Figure 1). The objective of this paper was to extend these YoY monthly CPI

predictions until the end of 2023.

2. Methods

2.1 Statistical Methodology

The design, theoretical basis, and characterisation of TNIM has been provided in

detail [1, 3]. In accordance with [1, 3], the following nomenclature will be adopted:

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 𝑣𝑇𝑁𝐼𝑀(𝑡) = 𝑣𝐵𝑀𝑆(𝑡) − 𝑣𝐺𝐷𝑃(𝑡)

where v is the “velocity” (growth rate); TNIM, total national inflation measure for the

US; BMS, the US broad money supply, as measured by M2; GDP, the real US gross domestic

product.

This dynamic relationship between CPI and TNIM is given by the equation:

𝑣𝐶𝑃𝐼(𝑡 + 𝑇𝑙𝑎𝑔 ) = 𝑎 𝑥 𝑣𝑇𝑁𝐼𝑀(𝑡)

where 𝑎 is a constant over the time period being investigated and the lag time
(𝑇𝑙𝑎𝑔) has been estimated to be approximately 15 months [3]. The time period investigated
was from the beginning of 2021 until (for predictive purposes) the end of 2023.

2.2 Time Series Data

The sources of time series data, from the beginning of 2021, are: US BMS [4], US real

GDP [5], and US CPI [6].

All plots of the data analysis given below were obtained using Microsoft Excel 2019,
32-bit version.

3. Results

The monthly 𝑣𝐶𝑃𝐼 data are plotted since the start of 2021 in Figure 2a. They are

compared with the corresponding monthly 𝑇𝑙𝑎𝑔-adjusted 𝑣𝑇𝑁𝐼𝑀 data values. This

required shifting the 𝑣𝑇𝑁𝐼𝑀 data values 15 months along the time axis. Also please note

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that US quarterly GDP data were converted to monthly GDP data using linear interpolation

in order to calculate monthly 𝑣𝑇𝑁𝐼𝑀 data values.

It can be seen from Figure 2b than from the beginning of 3Q 2021, 𝑣𝐶𝑃𝐼 increases

approximately in parallel with 𝑇𝑙𝑎𝑔-adjusted 𝑣𝑇𝑁𝐼𝑀.

It can be seen from Figure 3, that 𝑣𝐶𝑃𝐼 increases approximately linearly with 𝑇𝑙𝑎𝑔-

adjusted 𝑣𝑇𝑁𝐼𝑀 over the period 3Q 2021 to 1Q 2023. Using the approximate linear

relationship given in Figure 3, 𝑣𝐶𝑃𝐼 can be predicted from 𝑇𝑙𝑎𝑔-adjusted 𝑣𝑇𝑁𝐼𝑀. This then

allows the predicted YoY monthly CPI values to be calculated until the end of 2023 and is

given in Figure 4. It can be seen that the YoY monthly US CPI is predicted to be within the

range 0% to 2% in 4Q 2023 (Figure 4). This is falling below the Federal Reserve’s target of 2%

for CPI.

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 Figure 2: Monthly 𝑣𝐶𝑃𝐼 data are plotted together with the corresponding monthly

𝑇𝑙𝑎𝑔-adjusted 𝑣𝑇𝑁𝐼𝑀 data values

(a) Monthly 𝑣𝐶𝑃𝐼 data together with the corresponding monthly 𝑇𝑙𝑎𝑔-adjusted 𝑣𝑇𝑁𝐼𝑀
data values since the beginning of 2021

vCPI with time since the start of 2021 plus

corresponding Tlag adjused vTNIM profile
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
2021 2021.5 2022 2022.5 2023 2023.5 2024

vTNIM vCPI

(b) Monthly 𝑣𝐶𝑃𝐼 data together with the corresponding monthly 𝑇𝑙𝑎𝑔-adjusted 𝑣𝑇𝑁𝐼𝑀
data values over the period 3Q 2021 to 1Q 2023

From 3Q 2021
0.35
0.3 y = 0.0716x + 0.159
R² = 0.9765
0.25
y = 0.0623x + 0.0138
0.2
R² = 0.9533
0.15
0.1
0.05
0
0.75 0.95 1.15 1.35 1.55 1.75 1.95 2.15
Time (yrs) relative to the beginning of 2021

vTNIM vCPI Linear (vTNIM) Linear (vCPI)

Note: v is “velocity” (rate of change); CPI is the US Consumer Price Index; TNIM is the Total
National Inflation Measure

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 Figure 3: Plot of monthly 𝑣𝐶𝑃𝐼 data versus the corresponding monthly 𝑇𝑙𝑎𝑔-

adjusted 𝑣𝑇𝑁𝐼𝑀 data values over the period 3Q 2021 to 1Q 2023

vCPI vs vTNIM from 3Q 2022

0.18
0.16 y = 0.8606x - 0.122
R² = 0.9549
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
0.21 0.23 0.25 0.27 0.29 0.31 0.33

Note: v is “velocity” (rate of change); CPI is the US Consumer Price Index; TNIM is the Total
National Inflation Measure

7/11
 Figure 4: Plot of year on year (YoY) monthly observed US CPI since 3Q 2022 and the

corresponding predicted US CPI until the end of 2023

Observed and predicted YoY US CPI

9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
2022.75 2023 2023.25 2023.5 2023.75 2024

Observed YoY CPI Predicted YoY CPI

Linear (Observed YoY CPI) Linear (Predicted YoY CPI)

Note: YoY; year on year; CPI is the US Consumer Price Index

4. Discussion

YoY monthly US CPI is predicted to be within the range 0% to 2% in 4Q 2023 (Figure

4), which is falling below the Federal Reserve’s target of 2% for CPI. However, these

predictions are based on the following three assumptions:

(1) US CPI is dynamically related to TNIM with a time-lag of approximately 15

months. This has been investigated by Lacey 2022 [3]

(2) The primary source of US CPI is the result of an excess growth of the US broad

money supply (M2) compared to the growth of US GDP [1]

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 (3) The interest rate increases by the US Federal Reserve over the period 2022/23

[7] will have nullified imported inflation (e.g., increases in imported energy costs)

and the US wage / price interaction over this period. If this assumption is

incorrect then US CPI might be expected to decline at a slower rate than that

predicted.

5. Conclusion

Year on year monthly US CPI is predicted to be within the range 0% to 2% in 4Q

2023. However, these predictions are based on a series of assumptions. In particular, if the

interest rate increases by the US Federal Reserve over the period 2022/23 do not nullify

imported inflation (e.g., increases in imported energy costs) and the US wage / price

interaction over this period, then US CPI might be expected to decline at a slower rate than

that predicted.

Supplementary materials

There are none.

Acknowledgements

No financial support was received for any aspect of this research.

9/11
 References

[1] Lacey LF (2022a). A comparison of different measures of US price inflation,

including a potential new one, over the period 1980 to the end of 1Q 2022. From

researchgate.net, url:

https://www.researchgate.net/publication/362966394_A_comparison_of_difference_meas

ures_of_US_price_inflation_including_a_potential_new_one_over_the_period_1980_to_th

e_end_of_1Q_2022

[2] “Why Is the Consumer Price Index Controversial?”. From Investopedia, url:

https://www.investopedia.com/articles/07/consumerpriceindex.asp

[3] Lacey LF (2022b). Quantifying the dynamic relationship between the Consumer

Price Index (CPI) and a potential new measure of price inflation, Total National Inflation

Measure (TNIM), over the period 2012 to mid-2022 in the United States. researchgate.net,

url:

https://www.researchgate.net/publication/365609242_Quantifying_the_dynamic_relations

hip_between_the_Consumer_Price_Index_CPI_and_a_potential_new_measure_of_price_in

flation_Total_National_Inflation_Measure_TNIM_over_the_period_2012_to_mid-

2022_in_the_U

[4] “M2 (M2NS)” (Broad Money Supply). From Fred.stlouisfed.org, url:

https://fred.stlouisfed.org/series/M2NS

[5] “Real Gross Domestic Product”. From Fred.stlouisfed.org, url:

https://fred.stlouisfed.org/series/GDPC1

[6] “Consumer Price Index for All Urban Consumers: All Items in U.S. City Average”.

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 From Fred.stlouisfed.org, url: https://fred.stlouisfed.org/series/CPIAUCSL

[7] “United States Fed Funds Rate”. From Trading Economics, url:

https://tradingeconomics.com/united-states/interest-rate

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