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Consumer Price Index January 2021

This morning the BLS released the CPI Report for January 2021.

  • The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in January on a seasonally adjusted basis.
  • The gasoline index continued to increase, rising 7.4 percent in January and accounted for most of the seasonally adjusted increase in the all items index.
  • The energy index rose 3.5 percent over the month. The food index rose slightly in January, increasing 0.1 percent as an advance in the index for food away from home more than offset a decline in the index for food at home.

  • The index for all items less food and energy was unchanged in January. The indexes for apparel, medical care, shelter, and motor vehicle insurance all  increased over the month. The indexes for recreation, used cars and trucks,  airline fares, and new vehicles all declined in January. 


Not only was the CPI tame, but the BLS revised December from a reported 0.4% to 0.2% month-over-month and the CPI excluding food and energy from 0.1% to 0.0%.


Econoday economists expected 0.2% excluding food and energy. The number came in at 0.0%. Year-over-year, economists expected 1.6% with actuals at 1.4%.

Year-Over-Year Since 1971

CPI Year-Over-Year Percent Change NSA 2021-01 Long Term

Year-Over-Year Numbers

  • Over the last 12 months, the all items index increased 1.4 percent before seasonal adjustment.
  • The index for all items less food and energy also rose 1.4 percent over the last 12 months, a smaller increase than the 1.6-percent rise for the 12 months ending December.
  • The food index rose 3.8 percent over the last 12 months.
  • In contrast to these increases, and despite rising in recent months, the energy index declined 3.6 percent over the last year. 

Fantasy Inflation Numbers

The BLS arrives at these numbers by concluding the cost of shelter fell from 3.1% at the start of the Covid pandemic to a mere 1.6% in January.

The cost of medical care services purportedly fell from 5.3% year-over-year to 2.9%.

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Ask anyone who pays for their own medical care insurance if their year-over-year costs look anything like that shown in the long-term chart.

Ask the same question to anyone looking to buy a house.

OK, rent prices dropped in the pandemic because people started working at home and moving out of big cities.

The focus on "consumer" inflation picks this up. And it ignores medical care costs because most people are covered at work or are on Medicare or Medicaid. 

Inflation: How Should We Measure It?

The Fed's focus on CPI vs other measures of inflation is a huge mistake.

 Inflation is booming if one looks at housing prices and the true cost of medical care services regardless of who is paying. 

History also shows it is a serious mistake for the Fed to ignore asset bubbles, and those are part of inflation too, just not the CPI.

For discussion please see Inflation: How Should We Measure It?

The CPI purportedly measures consumer inflation. The problem is "consumer inflation" is a very poor measure of actual "price inflation".

It's inflation that matters, not alleged consumer inflation.

But the Fed, economists, and mainstream media all have their eyes on the CPI. 

Ignoring Inflation

Meanwhile, despite inflation and clear asset bubbles, the Fed says Monetary Policy Will Stay Accommodative For a Very Long Time.

Translated, that means forever or until a global currency crisis changes their tune.