Correlation between quarterly growth in WPI and CPI

cor_wpi_cpi.R

library(tidyverse)
library(readabs)

cpi_sa <- read_abs_series("A3604507J") |> 
  select(date, cpi = value) |> 
  filter(!is.na(cpi))

wpi_sa <- read_abs_series("A83895395V") |> 
  select(date, wpi = value) |> 
  filter(!is.na(wpi))

wpi_lead_lag <- map(1:4,
    ~mutate(wpi_sa,
            "Past_{.x}" := lag(wpi, .x)) |> 
      mutate("Future_{.x}" := lead(wpi, .x))) |> 
  reduce(left_join)

wpi_cpi <- wpi_lead_lag |> 
  rename(Current_0 = wpi) |> 
  left_join(cpi_sa, by = "date")

corrs <- wpi_cpi |> 
  corrr::correlate() |> 
  select(term, cpi) |> 
  filter(term != "cpi") |> 
  separate(term, into = c("series", "lag_num"), sep = "_") |> 
  mutate(lag_num = as.numeric(lag_num),
         lag_num = if_else(series == "Past", -lag_num, lag_num))

cols <- c("Past" = "#4472c4",
          "Current" = "#7d7d7d",
          "Future" = "#ff0000")

corrs |> 
  ggplot(aes(x = lag_num, y = cpi, fill = series, col = series)) +
  geom_col() +
  geom_text(data = ~group_by(., series) |> 
              filter(cpi == min(cpi)),
            aes(label = glue::glue("Corr. of {tolower(series)} wage growth with current inflation") |> 
                  str_wrap(12)),
            vjust = -0.2) +
  scale_y_continuous(breaks = seq(0,1, .1),
                     limits = \(x) c(0, x[2]),
                     expand = expansion(c(0, 0.05))) +
  scale_x_continuous(labels = \(x) if_else(x == 0,
                                           "WPI (current)",
                                           glue::glue("WPI (t{scales::number(x, style_positive = 'plus')})")
                                           ),
                     breaks = -4:4) +
  theme_minimal(base_size = 16) +
  scale_fill_manual(values = cols) +
  scale_colour_manual(values = cols) +
  theme(axis.title = element_blank(),
        legend.position = "none",
        panel.grid.minor = element_blank(),
        panel.grid.major.x = element_blank()) +
  labs(title = "Intertemporal correlations of price and wage growth (1997-2023), Australia")

ggsave("cor_wpi_cpi.png",
       width = 40,
       height = 22,
       units = "cm",
       bg = "white",
       scale = 0.8)


        

Based on slide 8: https://media.licdn.com/dms/document/media/D561FAQHJ-giCcKigOA/feedshare-document-pdf-analyzed/0/1705615972861?e=1706745600&v=beta&t=aKLkrvBcxbJpwNr4RuSv6uXo9oW3QOno464po8gjrT0