CPI Announced

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Gee, announced at .4, just like the estimate. Where's the .7 difference between the wholesale and retail. Are our retailers all of a sudden, less greedy, maybe there's hope afterall..........

-- BH (silentvoice@pobox.com), October 19, 1999

Answers

there's a difference in components in the 2 indices. E.g. CPI has a housing costs (real estate, education, medical care components.

Table A. Percent changes in CPI for Urban Consumers (CPI-U) Seasonally adjusted Un- Compound adjusted Expenditure Changes from preceding month annual rate 12-mos. Category 1999 3-mos. ended Ended Mar. Apr. May June July Aug. Sep. Sep. `99 Sep. `99 All Items .2 .7 .0 .0 .3 .3 .4 4.2 2.6 Food and beverages -.2 .1 .4 .0 .2 .2 .2 2.5 2.2 Housing .2 .4 .1 .2 .1 .2 .4 2.7 2.3 Apparel -.3 1.5 -.2 -.4 -.9 -.3 1.2 .0 -1.3 Transportation .7 2.4 -.5 -.6 1.2 .9 .6 11.4 4.1 Medical care .2 .4 .2 .4 .3 .4 .3 3.9 3.4 Recreation .0 .3 .2 .0 .0 .0 -.5 -1.9 .4 Education and communication .0 .1 -.1 .0 .2 .2 .0 1.6 1.0 Other goods and services -.6 1.0 -.2 .2 .9 -.2 1.9 10.3 9.2 Special Indexes Energy 1.6 6.1 -1.3 -1.2 2.1 2.7 1.7 29.4 10.2 Food -.2 .1 .4 .0 .2 .2 .2 2.5 2.2 All Items less food and energy .1 .4 .1 .1 .2 .1 .3 2.5 2.0

-- Sandwich (anon@anon.anon), October 19, 1999.


Sorry for the poor formatting

-- Sandwich (anon@anon.anon), October 19, 1999.

Don't confuse the bump in the market resulting from a classic short squeeze with authentic euphoria. The Cohens and Battipaglias of the world can get as giddy as they want, but it doesn't make them any less pinheaded.

-- Dave (aaa@aaa.com), October 19, 1999.

Hey, the DOW's up and the CPI was benign. I think Abbey Joseph Cohen, Ralph Acampurra, Joseph Battipaglia, and Elaine Garzarelli are geniuses. I think its time for you gloomers and panic mongers to get a life. Try to change things at the ballot box.

-- jq public (jqpublic@usa.com), October 19, 1999.

The editor of the Business section of our local paper (San Diego Union Tribune) had something to say about the CPI this morning:

Without housing prices, CPI may understate inflation

...Formerly, the CPI took home prices into account, reflecting the typical home price and typical interest rate. But in the early 1980s, the Bureau of Labor Statistics decided that was misleading. After all, rising home prices only affected the few consumers buying homes that month.

And a home is an investment, an asset. It shouldn't be measured in the CPI, any more than rising stock prices are, went the thinking. Thus, the bureau came up with a new figure called the "owners' equivalent rent of primary residence," or, as BLS puts it, "the amount a homeowner would pay to rent, or would earn from renting, his or her home in a competitive market."

Essentially, it's what it would cost if you rented your house to yourself.

With rare bureaucratic candor, the BLS admits that the owners' equivalent "is not an easily determined dollar amount," and the agency "spends considerable time and effort in estimating this value."

That's quite an admission, because shelter costs comprise 30 percent of the CPI, and the owners' equivalent is two-thirds of that, or a big chunk of the total index. Other shelter costs include such things as gas and electricity, water, trash collection, bedroom furniture and the like...

So the "shelter costs" number, which has great weight in the CPI, is not really a measurement - it's an estimate, and one which sounds almost unverifiable. *sheesh*

The article goes on to provide a "rule-of-thumb" for comparing the current CPI to its ancestors in 1994 and previously: add .7.

-- Mac (sneak@lurk.hid), October 19, 1999.



Basically, anything that increases in price too much, the government finds a way to fiddle the numbers to keep the reported CPI number down.

Like the aforementioned housing change. Houses starting to cost too much? Delete them and substitute apartment rents instead.
Car prices increasing because of all the smog and other shit hanging off the engine? Hey, that's not a price increase, it's a "quality" increase, we'll count the price the same.
A meal at a good restaurant costs too much? We'll substitute the Jack in the Box 99cent price leader hamburger.
Good quality slacks cost too much? We'll substitute Dockers and baggy jeans.

The CPI is NOT a cost-of-living (COL) index. It does not cover taxes and the costs of regulation. If you use the CPI as a yardstick to see "how you're doing" you get a false picture. You need to increase the reported CPI figures with a "truth-in-government" factor. I would say that the factor should be even more than the 0.7 mentioned above. What it should be exactly, unfortunately, is unknown.

Note that this has ramifications for investors. If you bought a stock five years ago at 100, and you sold today for 110, would you have a profit (asssuming for the example, 0% commissions)? The IRS would say you had a 10% profit. In reality, the 110 you get today would have only about 90% of the PURCHASING POWER of what you put in five years ago. If you don't take at least some estimate of COL into your financial calculations, you could wind up a "millionaire", but unable to afford the rent on a 1 bedroom apartment.

-- A (A@AisA.com), October 19, 1999.


In the last paragraph, to clarify the point -- instead of a purported 10% gain, you would really have a 10% LOSS (in purchasing power).

-- A (A@AisA.com), October 20, 1999.

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