Consumer Price Data: US In Deflation

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:

Shelter
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
December 2003.

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.

Anyone voting on Secret Laws not open to public inspect and debate is guilty of treason, as I see it.  And so’s the guy who made it illegal for the contents to be revealed.

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

How about a nice quadruple murder to keep the public eye off the crooked secret trade bill dealings?

“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…

Saudi Mosque Hit by Bomb Blast

Police: Pipe bomb discovered, detonated in south St. Louis

British cab driver guilty of Iraq bombing

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.

Comments

Consumer Price Data: US In Deflation — 5 Comments

  1. Do not miss the big picture; America is dead. We tap dance to a new owner:

    WASHINGTON – New labeling rules that require certain fresh meat products to disclose their country of origin are losing steam in Washington.

    The turnabout is being cheered by big agricultural companies like Minnesota-based Cargill Inc. but are a setback for cattle producers and pig farmers who had hoped the new labels would spur a “buy American” movement.

    )Edited for copyright compliance(

  2. Sadly we suffer from the PCD here in Australia, with the demented jihadis – if that is a word – going off to Syria to be brave martyrs then scampering back to Australia with there accumulated hatred for all things Christian when it gets too tough; and the gubmint welcomes this dross and FMTT has allocated 1.3Billion tax dollars to “rehabilitate” them! What can you do?

  3. I can’t help but take the concept of the US being in deflation with a big grain of salt. A meal for two at a decent restaurant costs over $50, and dollars don’t stretch farther in the markets for food, clothing, phones, furniture, etc. Once the price of oil recovers, I believe we’ll be back to seeing some percentage points of inflation again. And my guess is it won’t be long – maybe right after the election?

  4. Trying to figure out the fast track bill thing.

    If I understand the current process, congress authorizes the president to negotiate, giving him guidelines and such. Once negotiations are done, the president brings it back to congress with implementation legislation, then congress makes changes in the legislation and such and votes to either let the president sign the bill or not.

    The proposed process is president asks if he can fast track a deal to congress (TPP is written in as exempt from this part). Congress can give the president negotiating points at this point as well(?) If he gets approval to do so, he basically has full control in the negotiations and can sign the agreement with other countries. At this point we’re bound to the agreement. He then writes the implementation legislation and congress can either vote yes or no on it without the ability to make any changes to it or have a say in whether we should be making this agreement, as that part is already done. If they vote the implementation legislation down we would potentially start being charged fines or whatever other crazy thing the agreement says.

    Is that the basic idea behind it? If so I think the major problem I have with it is that the president can sign the agreement without congressional approval. I don’t have a problem with him having the power to negotiate the agreement or the creation of implementation legislation that congress has to either vote yes or no on without modification (most laws should probably be like that, get it right before it’s introduced or back to the drawing board).

    • The PROBLEM set on this is huge.
      1. Congress js backing an out of control president.
      2. Congress is giving the prez ability to negotiate. Let me give you an example of his skills: North Korea, Iran, Hillarygate…shall I continue.
      3. I am on the verge of taking out full page ad in the local paper to call out ANYONE from Texas who votes for this Anti-Constitutional abrogation of due process which (as laid out by our forefathers and fivemothers) includes open public debate and discussion. When we don’t have that, this is not longer the USA.
      Sobering points on Memorial Day weekend…and if we swallow this bullshit, many of my friends died in crapholes like Nam in vain.
      G