The Consumer Price report is just out from the Labor Department. As always, there’s some good news and some bad in it. The BAD is that on a 12 month basis the unadjusted 12-month numbers are down – two-tenths of one percent.
This leads fearful bureaucrats to quick, hurry up and seasonally adjust something, quick! Of course, since April of 2014 was exactly the same season as April 2015, just adjustments smell to rational people (like us, though I’m not too sure about thee) to smell like an odiferous male cow pie.
“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in April on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today.
Over the last 12 months, the all items index declined 0.2 percent before seasonal adjustment.
The index for all items less food and energy rose 0.3 percent in April and led to the slight increase in the seasonally adjusted all items index.
The index for shelter rose, as did the indexes for medical care, household furnishings and operations, used cars and trucks, and new vehicles.
In contrast, the indexes for apparel and airline fares declined in April.
The energy index declined in April, while the food index was unchanged.
The indexes for gasoline, natural gas, and fuel oil all declined, while the electricity index was unchanged.
The food at home index declined for the second month in a row, offsetting an increase in the index for food away from home. Major grocery store food group indexes were mixed. The all items index declined 0.2 percent for the 12 months ending April.
This represented a slightly larger decrease than the 0.1-percent decline for the 12 months ending March. The decline was driven by the energy index, which fell 19.4 percent over the last 12 months, with all the major components declining except electricity.
The food index rose 2.0 percent over the last year, and the index for all items less food and energy rose 1.8 percent.
No doubt, I am personally responsible for the food price decline (*I was dieting hard in April).
The problem, as always, is that CPI data can be very misleading. Let’s have a peek inside the BLS Manual that describes how some of the numbers are put together starting with Housing:
The CPI housing unit sample is the source of the data on
residential rents used to calculate changes in rents for the
rent of primary residence (rent) index. The housing survey
also uses these rent data in calculating changes in the rental
value of owned homes for the owners’ equivalent rent of
primary residence (REQ) index. These two shelter indexes
account for over 28 percent of the total CPI weight as of
Well, you can see the problem: It’s statistically difficult for people to capture real changes to housing expenses because when an ARM resets, to use one example, how do you reliably capture that? And what about the add-on effects of property taxes? Slippery doesn’t even begin to wrap your head around this one.
But, I would offer that since housing prices have recovered strongly since 2009, that it has likely, as I see it, tended to mask the effects of pernicious deflation. If you have owned a home through the whole housing bubble, bust, and recovery, your property taxes have likely gone up…and so it would seem deflation could be masked by that.
Another problem with keeping the statistics “honest” involves replacement goods. Say, for example, the tendency of many stores to carry only USDA Select grade beef. Didn’t used to be that way. Used to be people ate a lot more Choice beef. And, back in the day Prime beef was also consumed. Good luck finding it. We have to drive 50-miles (and we’re in the middle of cattle country!) to buy a really good steak.
This is where the substitution problem comes in. When people switch from Choice Top Sirloin to Select Sirloin (*topless, so to speak), how do you capture that?
Well, if you read the manual, you’ll see there is a formula and approach for that.
But then again, how do you price something like computers into the index? II would be willing to bet that for a significant portion of the population, communications expenses are understated. Because – at least in our home – communications expenses involve computers, phones, readers, landlines, DSL up-charges and a lot of other things. We spend at least $500 a month on computing – and that’s more than our home cost.
May seem outlandish, but I know lots of people with $200+ cell phone bills and they buy a new phone every year…and that’s something I need to ask BLS about, one of these days when we get time.
The consumer profile of America is changing: People are making not too much more, and whenever we shift consumption habits, it’s hard to encompass that with a single number like CPI.
Hedonic adjustments, sampling and non-sampling errors, effects of taxes…all that stuff adds up to a number.
And one that impacts 80-million people’s incomes – because that’s how many folks have salary and retirement adjustments based on this slippery stuff called CPI.
Amazingly, the futures show only a small decline. Apparently, drug testing on Wall Street isn’t as rigorous as you’d think going into a holiday weekend…
Republicans Sell Out, Too
Secret Trade Bill clears a key Senate hurdle. And I’m going on the record telling you when secret laws are passed that that public can’t read, it makes the US look more and more like a totalitarian state.
Voting on secret laws is bullshit, plain and simple. If it wasn’t dirty, and wasn’t good, it would be done in public.
Or, didn’t that get though your thick skull in the re-education camps call the Education System?
Government is now totally out of control and beyond the public’s reach. But you knew that already…so why stress on it…
Quick! Distract Everyone
“The Daily Bomber” is Back
I used to run a feature, now and then, when newsroom/gallows humor got the best of me, called The Daily Bomber.
It’s a bad enough idea that it’s time to recycle it….so here goes…
This last one is interesting: Dude blows up Americans building IED’s in ‘Raq, immigrates to England where he drives a cab…and the Brits keep letting people in. Doesn’t give me much confidence in the thinking skills of the British, it reinforces my belief in Political Correctness Disease (PCD), and it explains why our forefathers (and fivemothers) left England hundreds of years ago.
Sadly, we are on the same mental acuity slide…and fostered by those incurably infected with PCD.
One of these days the WHO will proclaim PCD is real…but it will be tossed off as WHO-who. A poor ho-ho from Ure he-he.