While the main purpose of our blog is to promote new projects and research we in CDPS are working on at all stages, we also want to highlight existing community development resources on our website, such as the Chicago Fed Income-Based Economic Index (IBEX), which may be of value to our readers.
The Chicago Fed IBEX is a set of indicators intended to help understand the economic experiences of vulnerable populations. The IBEX tracks inflation and consumer sentiment for groups such as the elderly and working poor with further breakdowns like education, income, and race. All data for all demographic groups are available for download in the form of spreadsheets.
The project was initially motivated by a desire to understand the economy that vulnerable populations face—an economy that may or may not differ from the one reflected in the more commonly reported aggregated measures. This information may be useful for policymakers who, for instance, must decide how changes in the cost of living should factor into benefit levels for government transfer programs like Social Security, which affect mainly the elderly and disabled. Similarly, in understanding the overall economy, forecasters may find it useful to analyze the relationship between sentiment and spending using breakouts along demographic lines.
The IBEX 12 Month Inflation Rates represent a monthly chain-weighted inflation measure, which captures more than 30 socioeconomic and demographic groups from 1983 to 2011. Each rate measures the percentage change in price-group-specific market baskets over the previous 12 months. The IBEX inflation rates are constructed using both Consumer Expenditure Survey and price data from the U.S. Bureau of Labor Statistics.
IBEX Consumer Sentiment
The IBEX Consumer Sentiment (IBEX-CS) is both a monthly and quarterly index of consumer sentiment that includes data for 46 different groups between 1978 and 2011. It is designed to capture the sentiment of consumers within different socioeconomic and demographic groups regarding varying economic situations. The Index of Consumer Sentiment (ICS) is itself a synthesis of two other indexes: the Index of Current Economic Conditions (ICC) and the Index of Consumer Expectations (ICE). All indexes are based on responses to questions in the Survey of Consumers, conducted by the University of Michigan’s Survey Research Center.
What was Discovered
Overall inflation rates tend to be similar. We find that the inflation experiences of different groups are highly correlated with, and similar in magnitude to, the inflation experiences of the overall urban population. Over the sample period, cumulative inflation for the groups ranged from 195% to 212%, compared with inflation for the overall population of 201%.
While as a general rule rates across groups tend to trend similarly, we did note one anomaly, which was older households—head of household or spouse was 65 years old or older. This group had a cumulative inflation that was 11 percentage points higher than the average for all the groups. Another interesting finding was that the population that experienced the most variability in inflation was the most vulnerable population, meaning they had lower income, on average, than the rest of the population.
Differences in consumer sentiment were more pronounced. In fact, “demographic characteristics are found to influence responses to all five of the component questions that contribute to the index measure of the ICS. That is, the importance of demographic characteristics holds for both subjective and objective questions. Individuals’ attributes not only influence perceptions of their own experiences, but also their expectations of the economy more generally.”