Inflation rose to 7.9% in February, led by food and energy
cnbc.com
cnbc.com
And yes, they do clarify that point in the article, which suggests that the headline is purposely misleading to get more clicks.
The Consumer Price Index (CPI) uses a single number to explain a general rise in prices that affects different consumer segments very differently. For example, it uses a methodology that basically excludes house prices by instead measuring owner equivalent rent. So a 30% y/y increase in house prices is under-reported.
Also is uses a specific basket of consumer goods to measure price increases, one that largely excludes high inflation items such as energy, healthcare and higher education. If these things are important to you, your personal inflation rate is likely much higher.
Finally, the CPI is calculated using a process of hedonic adjustments - but these only work one-way. For example, if steak gets too expensive, then the CPI basket may swap out ground meat instead, but if the price of a 50” flat screen TV comes down, then it is reflected in CPI with no hedonic adjustment.
“What did you spend money on?” captures the fact that more people are prone to buy more 50” TVs when they cost 3 tanks of gas than when they used to cost 6 weeks of pay.
When items purchased are judged to be of lower quality than before, they are penalized in the adjustment process just as the converse happens.
The author explains that for all practical purposes hedonic adjustments only happen in one direction and they therefore discount the corresponding price increase in the underlying good. They are manually curated and suffer from bias of the estimators.
For example when airline baggage fees were added separate from ticket prices, there was no hedonic adjustment. However hedonic adjustment is used to discount the increase in the price of Honda Accords over time.
The article was previously posted on HN with a healthy discussion that came to the same conclusion. [1]
[0] https://www.epsilontheory.com/im-trying-to-understand-hedoni...
Feel free to criticize individual reporters and articles though. That's how things improve.
It still wouldn’t be that hard to include “over 10 years”, or in 2023 for yearly budget increases like military spending. Instead they regularly say “this bill will cost $X” and a casual reader has little context in terms of what it would add to the yearly budget in % terms.
(And budgeting is one of the most important ways in which governments implement their election programmes.)
There's different ways in which governments can finance new/increased/additional expenses: 1. raise taxes 2. cut other spending 3. take on more debt
With Modern Monetary Theory MMT being enticing and shiny .. and balanced budgeting as just an annoying unnecessary burden on energetic and enthusiastic policy making as the predominant narrative (which is perpetually being pushed by most media; and I have the impression most people fall for it, even though it's dangerous and unsound IMO) .. it seems obvious that politicians - who want to get reelected - tend to choose option 3.
Because of this current mainstream opinion about government debt/budgeting, option 3 is currently the least damaging to politicians' popularity .. which is why it's chosen practically all the time.
If citizens want less money printing, they simply need to put pressure on politicians to make use of options 1 (raise taxes; for the rich) and 2 (cut other spending) instead of option 3.
What does it really mean when inflation is going crazy, but also many businesses are making really absurd, record profits? Is that a normal occurrence in periods of high inflation? It really feels more like price gouging than inflation to me, but like I said, I'm ignorant about economics.
How much inflation can be explained by the changes in the labor pool and government spending, compared to companies just charging more and hoarding more?
That's...normal.
Outside of stagflation (which is exceptional among inflationary conditions, hence the special name) inflation tends to be positively correlated with economic growth which is positively correlated with profits
Inflation suddenly becoming an issue right around the same time that a rapid bounce back from the COVID slowdown took hold wasn't a weird coincidence.
If a business' costs go up, they can raise their prices to maintain their margins.
> How much inflation can be explained by the changes in the labor pool and government spending, compared to companies just charging more and hoarding more?
If the main components are food and energy, then the things you listed are less likely to be the causes. Though energy prices could be a reflection (pre-Ukraine) of more economic activity generally as people stop staying at home and (e.g.) travel.
Yes, even during stagflation. Inflation means the price of some things rise really fast, and profits grow together, while other things rise very slowly, profits go negative and the companies stop being measured on that indicator.
Besides, as a rule, inflation pushes earning into the things that are renegotiated often. That is most of the companies prices (they are renegotiated every time you go in a store), and almost none of the workers salaries.
For example - I don't really drive that much on a day to day basis compared to the average American, and so if it's a huge 50% increase in gas prices yoy, that over indexes the inflation number for me because I might drive 80% less than the average American. So I would assume that inflation is really <7.9% for me.
* https://www.bls.gov/news.release/cpi.t01.htm
For anyone in Canada, StatCan has a "Personal Inflation Calculator":
* https://www150.statcan.gc.ca/n1/pub/71-607-x/71-607-x2020015...
Source: In my country, the government forces some product prices to be limited so they can trick us in to believing that the problem is smaller than it actually is
-7.9% in a month?!!!
Then i read the "to"
Bleh, that is almost nothing for us (Argentina, that is good for 2 months, twelve sounds like paradise.. )