I’ve been looking for a reasonable explanation for this for a while and literally cannot find one. SO help me understand, please. ❤️🤷♀️
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Generally they look at both and publish both
Food and Energy are generally impacted by different factors than consumer goods, but a spike in one of those two could mask the behavior in consumer goods so most inflation charts actually look at 4 things
All items
Food
Energy
All items not including food and energy
[If food costs start to climb 9.5% due to a specific set of circumstances but the rest of things are only growing at 5.5%](https://www.bls.gov/cpi/) then how much is inflation impacting people? It depends what percentage of their budget is food. The standard weighting for “All items” has inflation at 6% but that really masks the impact that high food costs have on lower incomes and the less significant impact they have on higher incomes.
Its also important to track energy separate because energy costs feed into other goods. If electricity costs increase 10% then that cost gets passed forward in the cost of other products since they now cost more to make so its important to be able to see it as both an input cost and as an end impact on the prices
We generally don’t, but some measures of inflation are useful under certain circumstances for measuring things which don’t have a seasonal fluctuation like food. If a particular crop has recently been harvested the price for that food will drop, but that isn’t really significant to a general measure of inflation.
We generally don’t, but some measures of inflation are useful under certain circumstances for measuring things which don’t have a seasonal fluctuation like food. If a particular crop has recently been harvested the price for that food will drop, but that isn’t really significant to a general measure of inflation.
Generally they look at both and publish both
Food and Energy are generally impacted by different factors than consumer goods, but a spike in one of those two could mask the behavior in consumer goods so most inflation charts actually look at 4 things
All items
Food
Energy
All items not including food and energy
[If food costs start to climb 9.5% due to a specific set of circumstances but the rest of things are only growing at 5.5%](https://www.bls.gov/cpi/) then how much is inflation impacting people? It depends what percentage of their budget is food. The standard weighting for “All items” has inflation at 6% but that really masks the impact that high food costs have on lower incomes and the less significant impact they have on higher incomes.
Its also important to track energy separate because energy costs feed into other goods. If electricity costs increase 10% then that cost gets passed forward in the cost of other products since they now cost more to make so its important to be able to see it as both an input cost and as an end impact on the prices
We generally don’t, but some measures of inflation are useful under certain circumstances for measuring things which don’t have a seasonal fluctuation like food. If a particular crop has recently been harvested the price for that food will drop, but that isn’t really significant to a general measure of inflation.
They report both.
In the case of Food/Energy, they’re often very volatile, so sometimes it’s useful to subtract them out. Basically, they’re very ‘noisy’- you’ll have big jumps up and down depending on supply/demand, but that can obscure the actual trend. For example, you might have a spike in energy prices one month because a bunch of oil rigs were down, but they’ll be back up and running next month. So it doesn’t necessarily tell you anything useful to include that one month spike. When you subtract off Food/Energy, this is “core” CPI. But there is also ‘normal’ CPI which does include Food/Energy.
In the case of housing, those are considered assets. CPI measures consumption. They *do* include the ‘consumption’ part of housing, basically measuring what you would’ve paid in rent. So they try to basically split the consumption part (which is counted) from the asset part (not counted)
They report both.
In the case of Food/Energy, they’re often very volatile, so sometimes it’s useful to subtract them out. Basically, they’re very ‘noisy’- you’ll have big jumps up and down depending on supply/demand, but that can obscure the actual trend. For example, you might have a spike in energy prices one month because a bunch of oil rigs were down, but they’ll be back up and running next month. So it doesn’t necessarily tell you anything useful to include that one month spike. When you subtract off Food/Energy, this is “core” CPI. But there is also ‘normal’ CPI which does include Food/Energy.
In the case of housing, those are considered assets. CPI measures consumption. They *do* include the ‘consumption’ part of housing, basically measuring what you would’ve paid in rent. So they try to basically split the consumption part (which is counted) from the asset part (not counted)
They report both.
In the case of Food/Energy, they’re often very volatile, so sometimes it’s useful to subtract them out. Basically, they’re very ‘noisy’- you’ll have big jumps up and down depending on supply/demand, but that can obscure the actual trend. For example, you might have a spike in energy prices one month because a bunch of oil rigs were down, but they’ll be back up and running next month. So it doesn’t necessarily tell you anything useful to include that one month spike. When you subtract off Food/Energy, this is “core” CPI. But there is also ‘normal’ CPI which does include Food/Energy.
In the case of housing, those are considered assets. CPI measures consumption. They *do* include the ‘consumption’ part of housing, basically measuring what you would’ve paid in rent. So they try to basically split the consumption part (which is counted) from the asset part (not counted)
They exclude food and energy because they are volatile and can be affected by many different things that don’t give a clear picture if the underlying trend.
Housing is excluded because they way they calculate housing is moronic and is a terrible measure. Housing is calculated with what is called “Owners equivalent rent.” Basically, they survey home owners and ask, I’d you were to rent out your house, what would you charge. People answering a survey unprepared will not give a good answer for that, so the number is a terrible one to consider.
They exclude food and energy because they are volatile and can be affected by many different things that don’t give a clear picture if the underlying trend.
Housing is excluded because they way they calculate housing is moronic and is a terrible measure. Housing is calculated with what is called “Owners equivalent rent.” Basically, they survey home owners and ask, I’d you were to rent out your house, what would you charge. People answering a survey unprepared will not give a good answer for that, so the number is a terrible one to consider.
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