On Wednesday the CPI (Consumer Price Index), came out for the month of August. The headline stated that the “U.S. Consumer Prices Unexpectedly Fall 0.1% in August”. The CPI basically meassures the rate of inflation. Are the prices of goods really going down? It depends on what you use to calculate the rate of inflation. While calculating the core rate of inflations the government omits the changes in prices of food and energy, the reason for that is stated below, but still having lived here for a long time and seen the prices of goods and services go up dramatically, I still wonder sometimes as to why do they not put food and energy back into the mix, isn't everything else related to food and energy? Can we survive without food and energy? If anything else those two should be the only things used to calculate the core rate of inflation. Anyways, it was just something to think about.
“Consistently volatile components of the PCEPI obscure economists' ability to evaluate monetary policy and the true inflation trend. To get a better idea of the underlying inflation trend, economists look at core inflation, which is traditionally measured by the PCEPI excluding food and energy. Removing food and energy from the PCEPI results in a less volatile series and a better gauge of the underlying inflation trend.”
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Interesting. I don't know much about inflation and related economics. But I would guess, since price of food items and energy-oil are always variable where as prices of goods increase or decrease in either direction with a pattern.
Do you think that could be a reason?
From what I understand CPI including Food + Energy is used to compare inflation across multiple years. However for shorter duration, CPI doesn't include food and energy due to seasonality and dynamically changing consumption pattern.
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