Today’s news that the Consumer Price Index data showed that prices have risen 7.5% over the past year is getting a lot of attention. Prices also picked up 0.6% on a monthly basis. Let’s be sure we understand what we are talking about with this data and what it includes.
The CPI influences all sorts of things in ways you may not realize. Some union contracts are keyed to the CPI, as are Social Security raises. The CPI is one of the tools that landlords look at to determine rent, and even child support and alimony payments are linked to the CPI.
Here is the newest data from the Bureau of Labor Statistics:
Here are the hottest sectors:
Increases in the indexes for food, electricity, and shelter were the largest contributors to the seasonally adjusted all items increase.
The food index rose 0.9% in January following a 0.5% increase in December. All of the six major grocery store food group indexes increased over the period. By far the largest increase was that of the index for meats, poultry, fish and eggs, which rose 12.2% over the year. The index for dairy and related products increased 3.1%, the smallest 12-month increase among the groups.
The energy index also increased 0.9% over the month, with an increase in the electricity index being partially offset by declines in the gasoline index and the natural gas index.
Along with the index for shelter, the indexes for household furnishings and operations, used cars and trucks, medical care and apparel were among many indexes that increased over the month.
You will see a range of useful new charts on the Bureau of Labor Statistics website today. Here is where to find them. They give you a visual account of the big chunks of the CPI. They also provide a chart comparing select cities against one another. (Click on the name of the city you want to see and the data lights up on the chart.)
You can also look at different regions and even different metro areas of the country. For example, here is Houston’s CPI. And here is Detroit, Seattle, Phoenix, Atlanta and St. Louis.
As you look at those numbers, realize that they are pegged to the index that began in 1982-84. That year was set at a value of 100, so if you see that a region of the country has a CPI of 256 now, that means inflation is up 156% since 1984 for an average inflation rate of 4.1%.
Here is other regional inflation data, including the newest compensation data and energy costs that you may not have explored:
Regional news releases:
The CPI is used to assess the changes in cost of living over time. The price of each item — such as milk, eggs, energy, clothing, transportation, and medical expenses — is taken and averaged on a monthly basis. Then the CPI is calculated by dividing the price of a market basket in a particular year by the price of the same basket in the base year.
The Consumer Price Index is based on the index average from 1982 until 1984, which was set to 100. Therefore, if you see a CPI reading of 140, it indicates a rise of 40% in the inflation level. If the reading was 250, the inflation level indicates a rise of 150%.
To control inflation, control COVID-19
The Consumer Price Index figures today are focusing our attention once again on the growing fires of inflation that are being fed by global supply chain interruptions linked to COVID-19. There is no chance that inflation will cool until the pandemic is in our rearview mirror.
The notion that the pandemic is an underlying cause of inflation may seem confusing if you think back to two years ago when oil and gasoline prices dropped as we sheltered in place. But that was because there was a supply glut of oil. When production dropped and was followed by a resurgence of travel, the demand and prices followed upward. There also was a big increase in people buying stuff, from furniture to exercise equipment, again at just the time when factories were not pumping out as much. That led to further price increases. Add to that the big government stimulus checks and it was spend, spend, spend.
At the same time, the pandemic made imported goods more expensive — and still does.
Wages are rising as lots of people — including seniors and 25- to 44-year-old women — dropped out of the workforce or cut back their work, pushing employers to step up their pay and benefits. Did you see, just as an example, what the Dollywood theme park in Tennessee announced yesterday? It is a remarkable benefit being offered even to seasonal and part-time workers from the first day of employment. Can you imagine the pressure ot will put on other employers in that community to compete in recruiting for the same workers?
The reasons for joining our team keep growing!https://t.co/z1r3oftlme https://t.co/zWHVAtSIQQ
— Dollywood Parks & Resorts (@Dollywood) February 9, 2022
Three kinds of inflation
At some level, everybody contributes to inflation when they earn a raise, or when a manufacturer or retailer raises prices to boost profits. Mint.com explains the three basic kinds of inflation. During the pandemic, all three of these forces played a part in driving up prices:
When there is more of a demand for goods and services than what the economy is able to produce.
Example: Consumers want to buy milk but farmers don’t have enough supply, resulting in the price of milk going up.
When the costs to produce goods and services increase, causing the prices for those goods and services to also increase.
Example: The tools and materials needed to produce milk increased in price, which causes the price of the milk to increase as well.
When workers expect their salaries to increase in order to maintain their living costs because the prices of goods and services have increased. These workers constantly anticipate prices to rise and demand higher salaries, which contributes to the prices of goods and services rising.
Example: The price of milk increases, and consumers want to be able to afford the milk, so they request their salary to also increase.
How concerned are Americans about inflation?
You might think that inflation and the economy are the top issues on people’s minds. Gallup asks that question every month and interestingly, while concern over inflation is growing, only 20% of Americans list economic concerns as their No. 1 issue. In fact, twice as many people list “poor leadership and the government” or “the coronavirus” as their No. 1 concern.
Some used cars are selling for more than they cost new
Car prices, for both new and used vehicles, are one of the fuels feeding the inflation rate. Again, once the pandemic stops interrupting computer chip and shipping supplies, prices will likely drop as assembly lines produce more vehicles to meet demand. Used car prices are cooling a little bit, but The Drive reports that some used cars are currently selling for more than they cost new off the lot:
Pulling data from 1.5 million used vehicle sales in January, iSeeCars observed lightly used late-model cars selling for an average of 1.3 percent more than what they sold for new, with the trend predictably favoring models whose demand outstripped supply by the greatest margins.
At the very top by a huge margin is the Mercedes-Benz G-class, or G-Wagen, lightly used examples of which are selling for 35.6 percent more than when new, for a premium averaging $62,705. (This makes sense, seeing we learned that their production stopped last year.) With Mercedes full up on G-Wagen orders until 2025, according to Motor Biscuit, buyers must either wait years for their SUVs or pay a premium now. But to most G-Wagen buyers, what is money but something to be seen spending?
This article originally appeared in Covering COVID-19, a daily Poynter briefing of story ideas about the coronavirus and other timely topics for journalists. Sign up here to have it delivered to your inbox every weekday morning.