Nowcasts change when new data arrive that are different than what was expected. This can be either because of the frequency with which new data arrive or the volatility of that new data.
The core inflation nowcasts use very few data sources, which arrive infrequently; therefore, they only change infrequently. Nowcasts of core CPI inflation are based only on past core CPI inflation; thus, the nowcasts can only change when new CPI data are released (or when past data are revised). However, if the data come in exactly as expected, then the core CPI inflation nowcasts will not actually change. Nowcasts of core PCE inflation are primarily based on past core PCE inflation, but they can also be affected by the availability of CPI data: if we have one more core CPI observation than core PCE for some month t, then we map month t’s core CPI observation to core PCE in month t. Thus, core PCE nowcasts can only change when we get new data on either the CPI or the PCE price index—but again, if the data come in exactly as expected, they actually will not change.
Core inflation also tends to be relatively stable, so revisions to core inflation nowcasts can be small when they do occur. By contrast, gasoline prices play an important role in headline CPI and PCE inflation nowcasts, and gasoline price nowcasts depend in turn on oil prices. Oil prices move around almost every day, and they can be quite volatile and thus difficult to predict. The headline inflation nowcasts can change when new CPI or PCE price index data are released; but between releases, they often move around based on incoming oil and gasoline price data.