Inflation Shock Momentum Index (ISMI)

The Inflation Shock Momentum Index (ISMI) updates data on coordinated directional pressure across the distribution of category-level inflation rates. This monthly indicator is intended to track persistent inflationary or disinflationary pressures in real time by identifying sustained directional runs in shocks to monthly inflation. The framework and methodology supporting this index are detailed in Lansing and Shapiro (2026a, b).

For each of the 130 or so categories of goods and services in the personal consumption expenditures (PCE) basket, we estimate a simple trend inflation model by regressing the monthly inflation rate on a constant and 1-month lagged monthly inflation using a rolling 120-month data window. The difference between the observed monthly inflation rate and the fitted trend model’s prediction defines the inflation shock. Positive momentum categories are identified as those experiencing a sequence of three consecutive months where realized inflation shocks are positive. Negative momentum categories are identified as those experiencing a sequence of three consecutive months where shocks are negative.

The shares for positive momentum and negative momentum categories are calculated by aggregating the individual category signals using their current consumer spending weights in the PCE basket. The final index is calculated as the net difference between the expenditure-weighted positive momentum share and negative momentum share. Positive values indicate broad-based upward pressure on inflation, while negative values indicate underlying downward pressure.

Figure 1 shows the net readings of the ISMI over the most recent 24 months.

Figure 2 provides the continuous historical time series of the net index from 1969 to the present.

Figure 3 displays the positive momentum and negative momentum components that combine to form the net index. The lines track the total share of the consumer spending basket experiencing consecutive positive shocks versus consecutive negative shocks.

Figure 1: Inflation Shock Momentum Index (ISMI) for past 24 months

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Note: Dark blue bars indicate ISMI values above zero; light blue bars indicate ISMI values below zero.

Figure 2: Inflation Shock Momentum Index, full data series

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Note: The ISMI tracks the share of PCE categories that are experiencing three consecutive positive inflation shocks minus the share experiencing three consecutive negative inflation shocks.

Figure 3: Positive and negative components of ISMI

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Note: The positive component (blue line) measures the share of PCE categories experiencing three consecutive positive inflation shocks. The negative component (green line) measures the share of PCE categories experiencing three consecutive negative inflation shocks.

References

Lansing, Kevin J., and Adam Hale Shapiro. 2026a. “Measuring Inflation Shock Momentum.” FRB San Francisco Working Paper 2026-10.

Lansing, Kevin J., and Adam Hale Shapiro. 2026b. “Using Inflation Shock Patterns to Help Forecast Inflation.” FRBSF Economic Letter 2026-18 (July 6).

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Inflation Shock Momentum Index data (34 kb)