5 replies on “Beware: Core CPI Follows Food Inflation”

  1. Steven
    My opinion is that ‘housing’ should be broken away from core – and as you say, make food a core with volatile energy broken out. Possibly rents and utlities would stay in the core and detached from home ownership valuations.

    -home ownership is a balance sheet asset vs current expenditure line item.
    -As a balance sheet item, negative valuation drops might weigh on consumption, but is not a determinant of daily expenditures of consumables. I’d say education is a consumable, although there is an expected future value – but in the present, a consumable.

    Looked at in this manner, I’d say there’s a double whammy problem now – further dropping asset valuation matched against higher consumable prices. W/out the ‘house’ weighting – core would maybe closr to double digits of late?

    thanks
    With

  2. Blue Jacket –
    You are pointing out some of the real issues with inflation for the little guy. And inflation is a much bigger number if housing is ignored. The CPI is used as a baseline to adjust salaries (in some sectors) and entitlement programs.

    I am watching my elderly relatives get screwed with this approach. Inflation effects various elements in our society differently. One solution might be to weight the CPI to income levels as the spending profile would be different.

    steven

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