Posted on 02/20/2014 8:11:42 AM PST by xzins
U.S. consumer prices barely rose last month as a sharp increase in energy costs was offset by cheaper clothing, cars and air fares. The figures indicate inflation remains mild.
The Labor Department said Thursday that the consumer price index rose just 0.1 percent in January, down from a 0.2 percent gain in December. Prices have risen 1.6 percent in the past 12 months. Excluding the volatile food and energy categories, core prices also rose just 0.1 percent last month and 1.6 percent in the past year.
The year-over-year increase in core prices was the smallest in seven months.
The "mild uptick ... confirms the fact that inflationary pressures remain well contained," Martin Schwerdtfeger, an economist at TD Bank, said in a note to clients.
(Excerpt) Read more at newser.com ...
In other words excluding the stuff everyone needs everyday.
Why count those?
We all gots EBT , right?
First, trust nothing from this administration.
Second, the CPI is a farce so laughable it is not to be taken seriously.
A box of granola bars use to have 6 bars, now 5.
Items that came in one pound bags now have 14 ounces.
Ice cream was 1/2 gallon.
Everything on the sorecshelves come in bigger boxes with less product while the CPI still counts it per box.
Real inflation since zero is at least 25% higher now than 2008.
The current cpi is designed purely to prevent politicians and the fed from looking bad. The same with unemployment stats. In fact, I seriously doubt there’s an honest government stat that is turned out at any point by any deptmt or agency in the entire US government.
Excellent point.
Uhhhh.....if people can’t afford clothing, cars and air fares, how does them costing less keep inflation low?
Whoa. You can afford bacon?
Party’s at your house!
Using their ridiculous point, if Ferari had a sale last month that dropped their cars down to an average of 100 grand, how does that help the price of chuck roast that’s gone from 2.89 a pound to 4.89 a pound in 2 years. I saw it at Wal-Mart a few weeks ago at 6.39 a pound. Chuck roast....ALWAYS considered a low cost, undesirable cut.
How about food prices? You can’t eat consumer durables or autos.
As I understand it, food is “volatile”, so they don’t count food in the new improved cpi with the weight it used to have.
In the meantime, food has doubled, but it doesn’t get counted, and as Organic Panic has pointed out, the government counts “packages” for so many items, and the manufacturers make the packages smaller but keep the price the same. IIRC, I had to get a bag of sugar recently, and the old 5 pounder is now a 4 pounder....but, I’m just a tin foil whiner, that’s not a price increase. /sarc
As I understand it, food is “volatile”, so they don’t count food in the new improved cpi with the weight it used to have.
In the meantime, food has doubled, but it doesn’t get counted, and as Organic Panic has pointed out, the government counts “packages” for so many items, and the manufacturers make the packages smaller but keep the price the same. IIRC, I had to get a bag of sugar recently, and the old 5 pounder is now a 4 pounder....but, I’m just a tin foil whiner, that’s not a price increase. /sarc
When the cost of food rises, does the CPI assume that consumers switch to less desired foods, such as substituting hamburger for steak?As for the Ferrari example? It's so dumb I can't wrap my mind around it.No. In January 1999, the BLS began using a geometric mean formula in the CPI that reflects the fact that consumers shift their purchases toward products that have fallen in relative price. Some critics charge that by reflecting consumer substitution the BLS is subtracting from the CPI a certain amount of inflation that consumers can "live with" by reducing their standard of living. This is incorrect: the CPI's objective is to calculate the change in the amount consumers need to spend to maintain a constant level of satisfaction.
Specifically, in constructing the "headline" CPI-U and CPI-W, the BLS is not assuming that consumers substitute hamburgers for steak. Substitution is only assumed to occur within basic CPI index categories, such as among types of ground beef in Chicago. Hamburger and steak are in different CPI item categories, so no substitution between them is built into the CPI-U or CPI-W.
Furthermore, the CPI doesn't implicitly assume that consumers always substitute toward the less desirable good. Within the beef steaks item category, for example, the assumption is that consumers on average would move up from flank steak to filet mignon if the price of flank steak rose by a greater amount (or fell by less) than filet mignon prices. If both types of beef steak rose in price by the same amount, the geometric mean would assume no substitution.
Incorrect.
My bacon is only when on sale with a coupon
I suspect that the unit pricing history is available for all of those products and more in the computers of the retailers. Somebody should do a study of a typical grocery cart of items and show the unit price increase over the last 6 years.
Unfair to seniors, military retirees, etc. What is hard to understand about the example of an expensive car going down, when the article is about the CPI dropping because deals on air travel, autos, and clothing? Did you read the article?
***By Emma Margolin
hardball
updated 4/6/2013 9:17:48 AM ET
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President Obama’s controversial budget proposal uses a formula called “chained CPI.” Here’s what you need to know about how it’s calculated, and how it may affect you.
And you thought the term “sequestration” was bad…
Details of President Obama’s proposed budget leaked on Friday, signaling his intention to cut Social Security and other benefit programs by way of a revised inflation adjustment known as “chained CPI.”
The proposed budget–expected to be released next week–enraged many on the left, who felt Obama had betrayed “the core of the progressive and Democratic legacy,” said Stephanie Taylor, co-founder of the Progressive Change Campaign Committee, in a statement on Friday. Critics on the right were also angered by the rumored cuts, which House Speaker John Boehner belittled as, well, too little. “If the president believes these modest entitlement savings are needed to help shore up these programs, there’s no reason they should be held hostage for more tax hikes,” he said in statement released Friday. “That’s no way to lead and move the country forward.”
But while many commentators were busy being outraged, others were merely confused. So for those of you wondering, “What the heck is ‘chained CPI,’ and why is everyone so mad about it?” here are some FAQs.
What is the CPI?
The consumer price index, or CPI, is a formula that measures the prices of goods and services we buy and how they change over time. These good and services include everything with a price tag, like food, housing, and clothing. The CPI is used to calculate cost-of-living adjustments–COLA–which affect how much money you receive from programs like Social Security. When cost-of-living-adjustments go up, you get a bigger check from the federal government.
How is that different from “chained CPI?”
The chained CPI slows the growth of entitlement programs by assuming that when prices go up for something, people switch to cheaper substitutes. That is, if the price of steak goes up, people will skip the steak and buy chicken instead. And if people aren’t necessarily paying more for their goods, they don’t need their benefits to rise. Estimates show that under the chained CPI, your cost-of-living adjustment would be about .3 percentage points below the plain CPI, which means you won’t see as big an increase in your Social Security check.
Can I see an example?
Sure. Let’s say your monthly Social Security check last year was $2,000. Using the CPI, the Social Security Administration found that the cost of living adjustment for this year was 1.7 percent. To calculate your new social security check, you take last year’s check and multiply it by your cost of living adjustment (COLA) for this year. You then add the result to last year’s check to get the new number. So here we go: 2,000 x .017 = 34. Using the CPI, your monthly Social Security check would have increased from $2,000 to $2,034.
Using the chained CPI, your COLA comes out to .3 percentage points lower–so instead of 1.7 percent, it’s now 1.4. 2,000 X .014 = 28. Your monthly Social Security check is now $2,028–$72 less a year than you would be getting using the plain CPI formula. Sounds tiny? The switch could save $130 billion.
What are the drawbacks?
Pay attention: this is the key part. Some analysts fear the chained CPI switch unfairly burdens seniors, who tend to have more health care needs–which, unlike food or clothing choices, are not “elastic.” If you need blood-pressure medication, you still need it even if (or when) the price rises. You can’t simply choose to have a different medical condition that happens to be cheaper to treat. And if you’re not free to substitute chicken for steak, the fundamental economic assumption that drives the chained CPI no longer applies. “Seniors have a different consumption basket from the young, one that includes more medical expenses, and [they] probably face true inflation that’s higher, not lower, than the official measure,” wrotePaul Krugman in The New York Times Friday. “This is, purely and simply, a benefit cut.”***
From a scientific perspective, it is not wise to complain about how the "CPI" is calculated by complaining about how the "chained CPI" is calculated.
The chained cpi was part of a side discussion. The Ferrari is about the article itself. Have you read the article?
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