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Let’s Look at Four Measures of Inflation Plus a Spotlight on Food

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10 comments on Let’s Look at Four Measures of Inflation Plus a Spotlight on Food

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Inflation data from St. Louis Fed, chart by Mish

Chart Notes

  • CPI stands for Consumer Price Index
  • PCE stands for Personal Consumption Expenditures. 
  • PCE differs from the CPI (Consumer Price Index) in that it includes expenses paid on behalf of consumers such as Medicare and company medical plans whereas the CPI only included expenses directly paid by consumers.
  • Core means excluding food and energy
  • Neither the CPI nor PCE directly includes home prices, instead they incorporate rent 
  • The yellow highlights on dates indicates timing of free money stimulus checks

Inflation had already taken off before the final and biggest round of free money.

Pre-Pandemic Inflation Measures  

  • CPI: 2.3% 
  • Core CPI: 2.4%
  • PCE: 1.9%
  • Core PCE: 1.9%

March 2022 Inflation Measures

  • CPI: 7.9%
  • Core CPI: 6.4%
  • PCE: 6.4%
  • Core PCE: 5.4%

CPI With a Spotlight on Food

CPI data from the BLS via St. Louis Fed, chart by Mish

CPI Seven Food Categories

CPI data from the BLS via St. Louis Fed, chart by Mish

Home Prices

Case-Shiller (CS) home price data via St. Louis Fed, chart by Mish

Case-Shiller Index vs CPI and Owners’ Equivalent Rent

Neither PCE nor the CPI directly incorporates home prices. Instead, both use rent and owners’ equivalent rent. In addition the BLS and BEA measures of rent are lagging and understated.

Owners’ Equivalent Rent (OER) is the mythical price one would pay to rent one’s own house from oneself, unfurnished and without utilities.

Allegedly, rent is only up 3.76% and OER 4.09%.

Given that rent and OER constitute over 31% of the CPI, it’s very understated and even more so if one directly factors in home prices. 

2021 Set New Annual Records for Home Prices. 2022 Continues the Trend

For more discussion of home prices, OER, and how understated inflation really is, please see 2021 Set New Annual Records for Home Prices. 2022 Continues the Trend.

CPI Up Most in 40 Years

For more on the CPI, please see Consumer Price Index Jumps to 7.9 Percent, Another New Four-Decades High.

That CPI report is as of February. Home price data lags.

Alleged “Benefits of Running the Economy Hot”

Finally, recall that Charles Evans, president and chief executive officer of the Chicago Fed wants to run the economy hot.

For discussion, please see Chicago Fed President Praises the “Benefits of Running the Economy Hot”

This post originated on MishTalk.Com.

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Mike Shedlock

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Lisa_Hooker
Lisa_Hooker
4 years ago
I propose a new index: the EEF, Eaters Equivalent Food. This is the number of tins of generic cat food equivalent to a 6oz USDA Choice (gotta watch the fat!) fillet mignon.
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whirlaway
whirlaway
4 years ago
So one of the reasons why PCE is lower than CPI is that more and more of the health insurance expenses are being shifted from the employers to the employees?
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StukiMoi
StukiMoi
4 years ago
“Running the economy hot”, if one looks at what is actually meant; simply means printing more money. Then handing that money to people close to The Fed. In exchange for them doing nothing. Since no new real wealth is created by simple money printing, the only, literally THE ONLY, real effect, is one of redistribution: The guys who get the new money, can now buy, hence control, a larger share of the fixed amount of real goods.
That’s what this illiterate ape believes is somehow “beneficial…” And darned near an entire country of rank morons, don’t even bat an eyelash listening to the trivially obvious-to-anyone-even-remotely-literate nonsense.
I mean: All this moron advocates for, is to redistribute existing, real, wealth/resources/capital: From the people who actually created it; To absolute nobodies cluttering up New York and elsewhere. Who know nothing, can nothing, understand nothing, have never built anything, have never done a day of work, have never contributed anything positive nor valuable to anything, and will never in their entire worthless lives ever make a dime from anything other than this sort of being handed stuff redistributed away from their betters.
But hey, as long as the idiots hear the words “Hot,” they are told to go Yeah! Yeah! Yeah!! Hot! Hot! Hot!! Dear Leader!!!!…… Life in the DumbAge, indeed.
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honestcreditguy
honestcreditguy
4 years ago
just got back from costco, please readjust graph….inflation is raging…..
I don’t see how the poor and lower middle class are making it….
this summer is going to be brutal, also, California is at extreme drought levels and the Gavin NewNazi has still not told people no lawn watering…..him and potus are 2 of dumbest men to ever be born…..Expect violence like you have never seen this summer. Got Armor!
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Felix_Mish
Felix_Mish
4 years ago
Why, oh why do these measures of inflation not include taxes?
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MPO45
MPO45
4 years ago
Reply to  Felix_Mish
the better question is why isn’t the standard deduction indexed for inflation? For that matter why aren’t all tax credits indexed for inflation? Someone creates an arbitrary number for a tax deduction or credit and stays the same for decades. This is additional theft on top of the currency debasement but most people are clueless.
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ColoradoAccountant
ColoradoAccountant
4 years ago
In the back of my brain I remember annual rent should be 1/15 of the house value. Divide again by 12 to get the monthly rent.
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TopsyTurvy
TopsyTurvy
4 years ago
According to rent.com, nationwide wide rent prices YoY are up 24.4% for 1 bedrooms and 21.8% for 2 bedrooms. Case-Shiller says Single-family homes are up 19.2% YoY. Yet the government says rent is only up 3.76% and OER 4.09%.
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Mish
Mish
4 years ago
Reply to  TopsyTurvy
You got it!
The CPI and PCE have a lot of pending inflation
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jonsbull
jonsbull
4 years ago
I guess Jen Psaki will have to call it the Putin Recession, then?
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