How can inflation be only a few percentage points and yet many goods and services are up over 50% since 2019?

Question

How can inflation be only a few percentage points and yet many goods and services are up over 50% since 2019?

In: 187

Answer 1

The basket of goods represents what an average consumer spends their money on, and is used as weights for the CPI/inflation rate.

So items that make up a larger share of an average consumer’s expenses have a larger impact on inflation. You can view these weights and see a more detailed explanation at the [BLS website](https://www.bls.gov/cpi/tables/relative-importance/home.htm#Weights).

But basically, if your rent costs have gone up 10% year-over-year, and the price of getting a haircut has gone up 100% year-over-year, then the 10% increase in rent will have orders of magnitude more impact on inflation than the 100% increase in the cost of getting your haircut. This is because, for an average consumer, rent might be 25%+ of all of their expenditures compared to how much they’d typically spend each year on haircuts, which is likely a small fraction of a percent of their expenditures.