Is inflation index out of touch? The CPI is up only 4%...but for most Americans, it feels much worse

from the Christian Science Monitor, via MSN:



Is inflation index out of touch?
The government's Consumer Price Index is up only 4% over the last year -- but for most Americans, the pinch feels much worse. Here's why.


By Christian Science Monitor

Between the gas pump and the grocery checkout, Americans have plenty of reasons to list inflation as Economic Enemy No. 1. But how bad is it, really?

The short answer: Bad enough, but don't judge the problem only by what it costs to fill a fuel tank.

It's not surprising that many people feel as if inflation is running hotter than the government's Consumer Price Index (CPI) suggests: just under 4% over the past year. Many Americans are paying more, especially if they commute long distances or are putting kids through college.

A perception factor is also at work.

The prices now rising fastest are the ones people see the most. Gas prices hit a record $3.78 a gallon on May 15, according to AAA, up 38 cents in the past month. Food prices in April notched the biggest monthly jump since 1990.

So while the prices of some important items bought less frequently -– cell-phone service, clothing, a house -- have fallen or remained flat, the view at the checkout counter is grim.

Another cause for worry: Wages are not keeping up with inflation.

"It's all bad," says Paul Trapani, referring to his living expenses. The Boston resident says all his costs seem to be rising by at least 5%, while pay raises don't match the increase.

"You actually get a pay cut," thanks to the inflation, Trapani says. "We just had Chinese food. I took out half the rice so I can put it into my gas tank."

Fuel prices hit some hard

Jokes aside, he has hit on a central problem for households across the nation. It's not that the government's inflation rate is understating the problem, many economists say. It's that inflation was higher in 2007 than in any year since 1990, and wages didn't keep up.

That may explain why 47% of adults in a recent CNN/Opinion Research poll cited inflation as the biggest economic concern. None of the other concerns, from mortgages to unemployment, scored even half that high.

"The CPI is a fine, reliable price index as far as it goes," says Jared Bernstein of the Economic Policy Institute in Washington. Yet "it absolutely doesn't reflect the true set of costs that everybody faces." ......(more)

The complete piece is at: http://articles.moneycentral.msn.com/SmartSpending/ConsumerActionGuide/IsInflationIndexOutofTouch.aspx

on social security and interest owed on its debt.

miniscule pay raises by corporate employers. Corporate America definitely has a stake in the misreporting of inflation numbers (or, in the accurate reporting of cooked numbers). It's more money for them.

how do you think that the government is lying. I know that Bush is corrupt, but I would think that it would be hard to lie about the inflation index. I did hear some Ron Paul campaign advisors directly imply that the government was lying about inflation.

It's been stripped of all meaningful indicators that would give a more accurate picture. The economists are either lying because they're afraid of sinking "the ship" if they tell the truth or they don't know what they're talking about, degree notwithstanding.

They have to deliberately lie to us or we'd be taking to the streets.

4%?!!! Yeah I'd say a little out of touch. Once again we can thank the Republican's for destroying the way we monitor our economy in an effort to keep people in the dark about how badly they have screwed up the country.

From the main index.

are food and gas. Our mortgage payment is fixed with less than 6 years to go. Clothing-I wear stuff until it's full of holes. Recreation/vacation-what's that? I don't plan on buying a new car or fridge-basically because I can't afford one even if I wanted to. Right now I'm living on $600/mo and my wife just got dumped from her job of 32 years in Feb.-she's getting a whopping $311/wk in unemployment. I buy what's on sale at the grocery. Her COBRA is costing her $350/mo + $100/mo for her meds and my VA is costing me about $64/mo on my meds. We've got about $8k in the bank that's getting nickled and dimed but our credit cards are paid off. We don't drive anywhere unless we can combine several things on each trip.

Go to www.shadowstats.com to see what the real numbers are.

Edited to add this from the Hard Money article:



Count me as a 'Bitter White Male!':grr:

discusses the CPI, GDP, and Unemployment rate

and thanks for the additional articles in your SIG line

I was going to post that if no one else did.

http://www.shadowstats.com/alternate_data is a page with a good variety of charts.

What's up?

Food is way up.
Heat is way up.
Electricity is way up.
Gas is way up.
College tuition is way up.
Houses are way up.
Healthcare is way up.
Tickets to events are way up.
Commodities are way up.

What's holding steady?

Cable TV, phone and internet are holding steady (should be dropping, but have cartels)
Computers are holding steady (because you have to buy a more powerful machine - should be able to buy same machines for less, but they never let that happen)
Clothes are holding steady (should be much lower - how much does cotton for a mass produced shirt really cost? but it's basically impossible to find truly competitive prices)

What's down?

Toothpaste is down - you can buy imported Chinese toothpaste (unfortunately, it is sweetened with anti-freeze)
SUV's are down - but only if you don't drive them

Sounds like on average, things are way up.

I've been saying for years that the CPI is a farce.

How can you see health care costs increase 20-30% annually; energy costs go through the roof; college costs increase the way they have and still have only a 3-4% inflation rate?

It's obvious that they only select irrelevant stats for the CPI to keep the administration in power in a good light.