Via Economic Policy Journal

EconomicPolicyJournal.com: The Government Says There’s No Inflation — Except for the Things People Are Actually Buying

The Government Says There’s No Inflation — Except for the Things People Are Actually Buying



Rex Nutting points out that price inflation is developing just the way I said it would.


He writes at MarketWatch:

The things that we are still spending money on — food, rent, booze and video streaming — are going up in price as the coronavirus pandemic wears on. The things that we aren’t buying as much of — gasoline, clothing, transportation and hotel rooms — are going down in price.


The Bureau of Labor Statistics reported Wednesday that the consumer price index fell 0.1% in May, driven by deep discounting on energy, car insurance, clothing and public-transportation prices. The so-called core rate of inflation, which strips out volatile food and energy prices, also fell 0.1%; it marked the first time the core rate has fallen three months in a row.


I’m not questioning the accuracy of the data, but there are serious questions about whether the consumer price index over the past few months reflects the experience of many households. After all, do you care if gasoline prices fell 3.5% in May if you didn’t buy any?..


In May, grocery prices rose 1% as compared with April. Over the past three months, they’ve risen 4.1% — that’s an annual rate of 17.5%. Beef prices are up 11% in just three months.


Shelter prices (including both rental and ownership costs) are not rising as fast as they were at the beginning of the year, but they are still increasing, up 2.6% in the past year compared with a 0.9% drop in the prices of everything else.


And because shelter costs take up such a huge portion of household incomes, even a 0.2% monthly increase translates into a hefty hit to the budget, especially for low-income families that spend, on average, 41% of their income on housing.

Way back in April I wrote:

I am warning my subscribers to the EPJ Daily Alert that we are headed to strong acceleration in price inflation on the other side of the COVID-19 panic—though it might not show up immediately in government price indexes because there will be discounting done by cruise lines and other sectors where people won’t want to buy. The price inflation is only going to be in the things we are buying!

But, hey, if the BLS Consumer Price Index is your god, don’t worry within a month or two I expect the whole damn index will start climbing.

RW

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