REPEAT: Dallas Fed Paper: PCE Infl Likely To Be Revised Higher

Repeats Story Initially Transmitted at 17:29 GMT Aug 23/13:29 EST Aug 23

--May Be Close to Fed's Inflation Target Than Initial Data Show

--Dallas Fed Economists Construct PCE Infl Nowcast Model

By Jean Yung

     WASHINGTON (MNI) - The economy may be closer to the Federal Reserve's

inflation target than "commonly believed," according to two economists at the

Dallas Fed whose research finds it likely that the personal consumption

expenditures price index rose more than official data suggests in April and

June. 

     The Bureau of Economic Analysis is likely to revise higher June PCE

inflation to 1.6% from 1.4% and April's figure to 1.9% from 1.7% next summer

based on an analysis that factors in Fed-conducted manufacturing survey results,

wrote Alan Armen and Evan F. Koenig in the bank's latest Economic Letter. 

     The BEA releases a first estimate of PCE inflation typically with a

two-month delay and then revises the figure twice in the subsequent months. It

also issues annual revisions every summer. 

     The economists constructed a PCE inflation "nowcast" by combining

information from the consumer price index report with the prices paid index from

regional Fed surveys and found it to be "competitive" with government

statisticians' estimates of PCE inflation. 

     The New York, Philadelphia, Richmond, Kansas City and Dallas Feds each

conduct monthly surveys of prices paid by manufacturers in their districts. 

     Even after the BEA has released its first and third estimate of PCE

inflation, the survey data capture pertinent information not included in those

reports, the economists said. 

     "The earliest official PCE inflation estimates should not be taken at face

value. Recent low inflation readings will likely be revised upward," the

economists said. 

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com