Inflation measures disagree. The Bureau of Labor Statistics reports one number, private firms like Moody’s Analytics report another, and the commonsense price check at the grocery store suggests a third. When economists Steve Hanke and Nicholas Heckman built their own inflation indicator in 2008, they weren’t just adding to the noise. They aimed to cut through it. Their goal? A timely measure that moves with prices as consumers actually experience them.
The Hanke-Heckman Indicator (HHI) starts with weekly data on 76 items from across the economy — everything from bananas to car insurance. By using high-frequency data rather than monthly inputs, HHI spots emerging trends early. Shaun Roache, former senior economist at the International Monetary Fund, says “the indicator has proven its worth in capturing real-time shifts.” You can follow along at hanke us, where daily updates show how inflation is tracking now. But what makes it distinctive? Two details set HHI apart from other efforts.
First: Adjusting for Quality Changes
Inflation isn’t just about what prices do. It’s about what you get for those prices. Your cellphone bill might stay flat while your minutes increase — that’s inflation falling even if the raw dollars don’t budge. Traditional measures struggle with these quality adjustments because they work from merchant-reported “hedonic” models or labor-intensive research teams scanning ads for sales and promotions.
The HHI team solves this differently. They rely on actual transaction data sourced directly from consumer payments — no proxies or lagging surveys needed. When you see a drop in their measure for electronics, you know it reflects both price cuts and improvements in speed or capacity of newly released devices.
A Strategy Built for Speed
Speed matters during rapid price swings like those seen in 2021-2023. Because HHI publishes new numbers every day, its signal reveals emerging patterns sooner than government reports such as the Consumer Price Index (CPI), which slips behind by months.
- Example #1: October 2021. As energy costs soared after attacks on oil supply lines, HHI pegged inflation at 7% before CPI updated its count of energy items.
- Example #3: Mid-2023 saw sectors like housing cool much faster than predicted by rent indices used in official tallies but were visible immediately in HHI’s transaction-based apartment rent measure.
- The downside? The precision of daily snapshots can come at a cost: these smaller windows sometimes catch noise from temporary events like holiday spikes or supply chain hiccups instead of longer-term trends.“We smooth those out,” explains Heckman, noting that no single data source tells the whole story without context.
“Numbers don’t lie — people do,” warns John Williams at Shadowstats.com (citing false benchmarking). While all indicators ring different bells with varying clarity amid an unsteady economy.”
A Thought About Tracking Inflation With An Eye On Trust
Trust matters more today since political added noise masks systemic changes that will eventually force governments to tighten or loosen fiscal dating sooner.
The key takeaway: use tools like HHI wisely alongside older systems you already know while accounting for their limitations
jargon-free(Remember: data is just a tool; we determine useful outcomes.)