Calculate Inflation with R

December 1, 2015
By

(This article was first published on R Tricks – Data Science Riot!, and kindly contributed to R-bloggers)

I was surprised to see there weren’t more of these types of calculators in the R community. Inflation and adjusted payments seem like they would be more common. I was able to find a way to gather Consumer Price Index data using the quantmod package but quantmod leaves you to your own devices in converting the data. So, I whipped up a formula, this will most likely be incorporated into my upcoming BLS scrape package.

The function grabs the CPI data as a flat file, converts the data to an xts object and finds the average CPI index for each year. It then calculates an adjusted “dollar” by dividing the average CPI for your target year to your base year and uses that multiplier to calculate the value of a dollar for any given year related to your base year.

Note: for this to work you must have a “base year,” i.e. something to compare to. So, if I wanted to know the current-day value of $1.00 USD from 1947, I would use 1947 for my base year and find out the 2015 value is $10.62.

The Results:

date base.year adj_value pct_increase
12/1/10 1947 9.78 878.0269058
12/1/11 1947 10.09 908.5201794
12/1/12 1947 10.3 929.5964126
12/1/13 1947 10.45 944.8430493
12/1/14 1947 10.61 961.4349776
10/1/15 1947 10.62 961.8834081

To check the math, I can go to the BLS inflation calculator web-app.
Screen Shot 2015-12-01 at 10.17.14 AM
The Code:

inflation_adjust <- function(base_year=NA){  
    require(dplyr)
    require(xts)
    if (nchar(base_year) == 4){
    #Load file from BLS servers
    temp<-tempfile()
    download.file("http://download.bls.gov/pub/time.series/cu/cu.data.1.AllItems",temp)
    cu_main<-read.table(temp,
                        header=FALSE,
                        sep="t",
                        skip=1,
                        stringsAsFactors=FALSE,
                        strip.white=TRUE)
    colnames(cu_main)<-c("series_id", "year", "period", "value", "footnote_codes")
    unlink(temp)
    #Get rid of annual time periods and add real dates.
    cu_main <- subset(cu_main,series_id=="CUSR0000SA0")
    cu_main <- subset (cu_main,period!="M13")
    cu_main <- subset (cu_main,period!="S01")
    cu_main <- subset (cu_main,period!="S02")
    cu_main <- subset (cu_main,period!="S03")
    cu_main$date <-as.Date(paste(cu_main$year, cu_main$period,"01",sep="-"),"%Y-M%m-%d")
    cu_main <- cu_main[c('date','value')]
    cu_main <- xts(cu_main[,-1], order.by=cu_main[,1])
    cu_main <- round(cu_main, 1)

    # Get average yearly CPI.
    avg.cpi <- apply.yearly(cu_main, mean)
    avg.cpi <- round(avg.cpi, 1)
    # Formula for calculating inflation example: $1.00 * (1980 CPI/ 2014 CPI) = 1980 price
    cf <- avg.cpi/as.numeric(avg.cpi[as.character(base_year)])
    colnames(cf) <- "adj_value"
    #cf <- round(cf, 2)
    dat <- merge(avg.cpi, cf)
    # Xts object to data frame
    dat <- data.frame(date=index(dat), coredata(dat))
    dat$base.year <- as.character(base_year)
    dat$pct_increase <- (1-dat$adj_value) * -100
    # Round dollar amounts
    dat$adj_value <- round(dat$adj_value, 2)
    # Reorder cols in a more usable fassion
    dat <- dat[c('date','base.year', 'adj_value', 'pct_increase')]
    return(dat)
    }
    else {(message(
        "***************************************************************************************
        Please input a valid four digit year without quotes. For example: 2015.
        ***************************************************************************************", appendLF = TRUE))
    }
}

Photo by che1899

To leave a comment for the author, please follow the link and comment on their blog: R Tricks – Data Science Riot!.

R-bloggers.com offers daily e-mail updates about R news and tutorials on topics such as: Data science, Big Data, R jobs, visualization (ggplot2, Boxplots, maps, animation), programming (RStudio, Sweave, LaTeX, SQL, Eclipse, git, hadoop, Web Scraping) statistics (regression, PCA, time series, trading) and more...



If you got this far, why not subscribe for updates from the site? Choose your flavor: e-mail, twitter, RSS, or facebook...

Comments are closed.

Sponsors

Never miss an update!
Subscribe to R-bloggers to receive
e-mails with the latest R posts.
(You will not see this message again.)

Click here to close (This popup will not appear again)