The survey was conducted by a prominent survey firm that has been collecting CEOs' and top executives' perceptions and expectations for various firm-specific outcomes with the aim of identifying turning points in business cycles prior to the publication of the official data, and closely monitoring changes in important macroeconomic variables, such as output, demand, prices, and employment. In 2018, this survey firm agreed to add two inflation-related questions to its quarterly survey. The first round of the survey was conducted in April 2018. We have access to responses to these two questions as well as basic demographic information for firms (industry and size). We can use the demographics to construct weights.
We ask the following question in every wave:
Question 1: “What do you think will be the inflation rate (for the Consumer Price Index) over the next 12 months? Please provide an answer in an annual percentage rate.”
The second question rotates across waves:
Question 2A (April wave): “What annual inflation rate do you think the U.S. Federal Reserve is trying to achieve on average?”
Question 2B (July wave): “What do you think has been the annual inflation rate (for the Consumer Price Index) over the last twelve months? Please provide an answer in annual percentage rate.”
Question 2C (October wave): “What do you think will be the average inflation rate (for the Consumer Price Index) over the next 5 years? Please provide an average annual percentage rate.”
Question 2D (January wave): “What do you think is the probability that the annual inflation rate (for the Consumer Price Index) over the next 12 months will exceed 5%?”
Question 2A is asked every year in the April wave and it aims to measure perceptions of the Fed’s inflation target. This statistic is important for gauging the credibility of the Fed as well as its ability to influence inflation dynamics. Question 2B (asked in every July wave) elicits perceptions of inflation, which is usually the strongest predictor of inflation expectations. Question 2C (asked in every October wave) measures longer-run inflation expectations, which provide a metric for how anchored inflation expectations are. Finally, question 2D (asked in every January wave) provides a measure of uncertainty in inflation expectations.