No Inflation If You Don’t Eat or Drive
May 14th, 2008 | By Contrarian Profits | Category: Featured, Financial NewsInflation, if you believe what the government tells you, ran at 3.9% in the 12 months ending this April, but was it more like 5% or even 10%?
According to CNN “part of the disconnect may be due to the fact that nondurable goods, such as food and gasoline, makes up only 12% of the Consumer Price Index (CPI), the main measure of inflation.
In addition, food and energy prices are eliminated from the so-called core CPI, which many economists tend to focus more closely on because they claim food and gas prices are volatile.
But food and energy costs are a very important part of household budgets. And those prices have been skyrocketing: Gas prices were up about 21% over the 12 months ending in April.
So-called “seasonal adjustments” also come into play. Because of these adjustments, the government reported that gas prices were 2% in April, despite the fact that on a non-adjusted basis, gas prices rose 5.6% from March.
For more on how how seasonal adjusting skews inflation, read on at Mish Shedlock’s blog.
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