CPI for all items rises 2.9%; shelter up | Hacker News Reader

CPI for all items rises 2.9%; shelter up

bls.gov

40 pointsimpish920870 comments

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I think the headline is incorrect. All items seem to be 2.9. 3.2 is less food and energy.

Agreed. NYT headline reporting 2.9.

The Fed only looks at the data less food and energy because those are the most volatile.

Right, but that doesn't excuse the headline.

Yep, my bad. Fixed now.

This is the annual inflation rate. Annualized inflation of 2-3% is generally considered a modest, stable rate by economists.

The hundred year aggregate number is like 2.8% I believe

Well I'm happy they consider it modest and stable because most people I know consider economists insane and unstable.

> $1 in 1924 is equivalent in purchasing power to about $18.37 today, an increase of $17.37 over 100 years. The dollar had an average inflation rate of 2.95% per year between 1924 and today, producing a cumulative price increase of 1,737.28%.

> This means that today's prices are 18.37 times as high as average prices since 1924, according to the Bureau of Labor Statistics consumer price index. A dollar today only buys 5.444% of what it could buy back then.

This is at a time where technology is making everything cheaper mind you...

> This is at a time where technology is making everything cheaper mind you...

If this were true, then there would be no inflation.

Are you seriously trying to argue that technology is adding to inflation? I'm not following...

It doesn't make everything cheaper.

The price of housing is one of the biggest drivers of cost of living in the US. The constraint on housing supply is primarily political (codes and zoning) not technological.

Also, financial. Interest rates play a huge part in both the supply and demand for housing.

No. I'm saying technology makes some things cheaper, but not all things.

For certain classes of goods that's arguably true. If you check the inflation categories you'd see that mass produced goods have actually gotten cheaper, but services involving people (eg. tuition or healthcare) has gotten more expensive.

https://www.aei.org/wp-content/uploads/2022/07/cpi2022junea-...

Well you don't get paid in 1924 dollars do you?

No, I get paid in 2024 dollars that are unadjusted for inflation (see mostly static wage growth since the 70s). But.. That's fine and all. As long as those that got paid in 1960s dollars got to have a society in where they can accomplish so much with those dollars at my generation's expense.

I'm happy we're looking at dollars as cars. "This is a 1924's dollar model and that is 1960s one". Makes you really wonder how crazy we are as a society to view our output denomination like that.

>No, I get paid in 2024 dollars that are unadjusted for inflation (see mostly static wage growth since the 70s)

This implies that if inflation wasn't a thing, you'd somehow be able to keep your pay raises (including any inflation adjustment), which seems doubtful.

> This is at a time where technology is making everything cheaper mind you...

Automation is just one factor of supply and demand curve movements. Supply (and demand) of labor, money, energy, good weather, etc are others.

That's intentional, to incentive people investing their money instead of stuffing it in their mattress, where it doesn't help anyone. As long as wages raise as well, it's not a problem. You shouldn't compare prices to prices 100 years ago, but purchasing power 100 years ago to purchasing power now.

Wages don’t seem to have raised at the same rate at all.

https://www.epi.org/publication/charting-wage-stagnation/

Weirdly, most graphs start getting off in the 1970s when the US left the gold standard. This is to be expected due to the Cantillon Effect.

https://river.com/learn/terms/c/cantillon-effect/

>>As long as wages raise as well, it's not a problem. You shouldn't compare prices to prices 100 years ago, but purchasing power 100 years ago to purchasing power now.

>Wages don’t seem to have raised at the same rate at all.

>https://www.epi.org/publication/charting-wage-stagnation/

Figure 1 from that link is compares actual income with "projected assuming no growth in inequality"... whatever that means, not inflation.

Figure 2 compares hourly compensation with productivity, not inflation

and on and on...

Real wages (ie. inflation adjusted) has gone up, albeit slowly[1]. Even your link suggests this. "Stagnation" implies staying in the same place, not falling behind.

[1] https://fred.stlouisfed.org/series/LES1252881600Q

A good website on this:

https://wtfhappenedin1971.com/

yea yea we've all heard it. your spending is my income therefor I get to steal your wage from you if you don't spend it. "we'll encourage consumerism by taking the money from them if they don't spend it"

Sometimes I wonder how people have come to accept this line of thinking as anything but malicious.

As to your second point, yes. PP is more important, so let's use that. I'm sure the picture will look a whole lot better... /s

Why does the price of things today vs 1924 matter? Do you have a store of cash from 1924? Is there actually a downside of this steady long-term inflation?

If the immorality of theft is of no concern to you then perhaps any of the following reasons may jive a little bit better with your ethos:

1. Destruction of savings

2. Distortion of price signals in markets

3. Impoverish those on long term fixed/low income

4. Creates massive inequality especially inter-generationally

In my estimation however, if you really have to ask about the benefits or downsides of theft then you've already started at the wrong end of things.

Are you equating inflation with theft?

Low, stable inflation is a natural phenomenon in a growing economy, largely a function of market forces.

So we all came together, agreed on a shared store of value, then said no one can "poof it" into existence, and then gave said power to only a single entity that now makes more of it without doing anything and we're all supposed to think "that's normal".

It's not theft, but it's not that far off from it. But at this point, we've normalized things like "taxes" anyways, so peoples' definition of theft doesn't align with reality, so why would it be different when it comes to printing of money.

Everyone is just post-rationalizing about this because they can't cope with the logical inconsistency of the world they live in.

I think an (insane and unstable) economist would say that technology is indeed making everything cheaper, and as a result the average person's buying power is increased. Since buying power has increased, demand has gone up for all goods and services, and since demand has gone up prices have risen.

Do you consider loosing half your long term savings within 24-36 years modest and stable?

I don't lose it because I invest my savings in assets that grow at a rate faster than inflation. Inflation encourages investment, vs hoarding cash with an expectation that paper is going to hold value into the future. It's just paper, it has no productive value. Currency transfers value, assets hold value.

TLDR Accumulate assets at favorable prices to invest for your future.

https://academic.oup.com/qje/article/134/3/1225/5435538

What interest rate are you assuming on savings and investments, and why is it less than the historical average?

Long term savings shouldn’t be in cash. Throw it in VT, VTI, VOO, or even a target date fund, and you’ll keep up with inflation.

they shouldn't be in the market either, they should be on a non-productive store of wealth that people could depend on and isn't hitched to Congress's penchant for debasing money and arbitrarily manipulating the economy through fueling consumerism

Your "long term" savings is in cash? Because if it's not, it's in assets of some form or another, and assets inflate along with the rest of the economy.

Inflation does not imply economic growth in real terms.

All the sibling comments snarkily asking why you don’t invest your money is mind blowing to me. Are we all so conditioned that we can’t see the insanity behind being forced to invest the results of your labor or you’re poor? It is a tax on living that does not need to exist, and the end result is it disproportionately benefits the capital class.

Incredible how the elites have conditioned us to encourage systems that impoverish us.

The way I have heard it explained is that a general low level inflation is more aimed at the rich than the poor. In that, if you look at the total money supply, most of it is in the hands of the rich, almost by definition.

So, if you have no inflation, or even deflation, then the rich just sit on their gold like dragons. It stays with them and doesn't circulate. The only change is really for gambling debts and having kids. It's not actually useful as a method of exchanging goods and services.

But if you inflate away the dragon's gold, then these rich asshats are pretty much forced to find ways to beat that inflation, just to stay stable. So, they go out and invest the money in gold mines and dunny roll companies. The rich then find out that they can actually make their gold piles larger than the inflation rate, sometimes.

That investment ends up being good for the poor as the rich have to give them jobs and these jobs pay wages and then you get the consumer economy of Henry Ford paying workers enough to buy the cars they are making (likely apocryphal). So, money then is flowing and not just sitting there. Which is kinda the point of money in the first place.

In general, inflation is about the rich. It just so happens that a side effect of inflation happens to mostly be good for the poor too. A very very rare win-win situation.

Or so the rich asshat tell me.

Your whole comment shows the goal is to maintain the socioeconomic order of those with assets (regardless of how they were obtained) maintaining greater purchasing power over those with fewer assets, even though simply hoarding assets provides zero utility to society, whereas having fewer assets but actually working provides utility to society.

A simple power law land value tax would limit the dragon from hoarding gold and incentivize working rather than hoarding. Instead, we have the exact opposite. We tax working via earned income taxes, and have lower capital gains tax rates. And we bail out asset owners time and time again, but when wages don’t keep up, it’s crickets.

In a way, it is also a way for old people to maintain their power, after their physical power declines. Things are hunky dory as long as economic growth is achieved, but if population dynamics are changing, then we’re in for some drama. The battle lines are not just rich v poor, but old v young, especially in democracies.

See the most recent proposal to court votes by removing income tax from social security income.

Yeah, I entirely agree that it's a system set up for the benefit of the rich.

Historically speaking, that's pretty much all we have ever had.

I do want to echo the difference though. In the 'old system' of hoarding dragons, the money was useless. In this 'new' inflation system, the money is being sent out into the economy to invest in things. See the ZIRP of the 2010s. The money is working, not the dragons, but at least that is something.

As for the elderly, the maximum outflows of social security in the US will be in ~2030. So expect a lot of chatter leading up to that year and then for it to die down (literally).

>As for the elderly, the maximum outflows of social security in the US will be in ~2030. So expect a lot of chatter leading up to that year and then for it to die down (literally).

The ratio of inflow to outflow is important, not the outflow. Also, Medicare/Medicaid get lumped in with Social Security for the purposes of discussion wealth transfer from workers to non workers, and I don’t see the ratio of inflow to outflow increasing anytime soon.

70% of shelter CPI is calculated by calling random homeowners up and asking them how much they think they could rent out their house for. It was switched to this in the early 80s when the Volcker shock spiked interest rates, housing payments, and CPI. Whatever you want to say about this method’s conceptual validity, it’s clearly a lagging indicator.

Wow, that is terrible. It would be trivial to track recently rented homes on Zillow or Redfin and ask the renters to use the figure on the rental contracts from those.

Rents are tracked separately, but weighted less than OER, presumably because most people own their houses. See "Rent of primary residence" and "Owners' equivalent rent of residences" in https://www.bls.gov/news.release/cpi.t02.htm

It is a flawed mechanism. Because homeowners are merely speculating based on Zillow or whatever.

They should really build a Kafka pipeline of actual rents from various geographies and get real data.

Or just ask RealPage what they're going to set rents to next month.

>Because homeowners are merely speculating based on Zillow or whatever.

Which seems fine, because most americans own their house and aren't paying market rent. Likewise, a decent portion of americans are on rent control, which means they're not paying market rates either. Using "actual rents" (market rents?) wouldn't represent the actual expenditures for a huge portion of the population.

Just curious are there any solid sources for percentage of rental units subject to rent control?

Google failed me in my quick search

They do also collect actual rent data, but that is fraught with its own problems. Notably that the large majority don't rent. If you are not collecting opinions from a meaningful segment of the population, you've missed the whole reason for preparing the CPI.

Actual sale data is the best way to find out someone's opinion, but asking them what they would hypothetically pay is nearly as good if sales data is absent. What is most important is to get an opinion from a statistically wide range of people. A billionaire paying $10,000 for a loaf of bread is not indicative. You need an indicator of what most people think.

There is no perfect mechanism.

>>The index for shelter rose 0.4 percent in July, accounting for nearly 90 percent of the monthly increase in the all items index.

Shelter seems to be the most tightly coupled item to interest rates. This to me seems like this will create a more hawkish fed.

I have heard some people say that higher interest rates are causing housing to go up because people aren't moving or building houses, but I don't think the fed has the same opinions. I would think the fed would not like to have a 0% interest rate for some time seeing as how it messed up the housing market for a decade.

Best case we see little to no housing appreciation over the next 10 years and that will bring us back to normal. Hopefully we don't see an appreciation like we have the last 10 years, that would not be a sustainable system and would likely further deteriorate the american dream.

Food inflation seems to be doing well, so that is encouraging.

With Biden cutting off migration at the border, construction companies, particularly in the South, are going to have a hard time finding workers at prices that people are used to paying for labor. This will either raise the cost of new builds or delay them, leading to an even bigger shortage in supply.

Change the title or remove the post. The OP injected their own feelings on a number that has been fairly consistent this year.

The CPI rose 2.9 percent in the year through July. It's the first time inflation is below 3% since early 2021.

    The all items index rose 2.9 percent for the 12 months ending July, the smallest 12-month increase since March 2021.

So overall good news but I think the overall effects of higher inflation are still being felt and any small price increase is pushing the limits of what people can pay.

Core CPI inflation, which excludes the index’s more volatile food and energy components, was 3.2% in July, matching estimates of 3.2% and June’s 3.2%

CPI including everything was 2.9% below estimate

Prefix your title with "US: "

Below expectations (3.0%), 50bps cut in September is getting more likely.

https://en.wikipedia.org/wiki/Goodhart%27s_law

I don’t really understand how employment compensation is set in a medium that is intended by government policy to be decreased in value over time.

How is that not a scam?

2-3% is the rate of inflation that has been shown, historically, to allow the monetary authorities and those close to them to transfer the wealth of the nation's public to themselves without (much) turmoil.

Any more than 2-3%, and you'd begin to notice that your children are being systematically impoverished, and revolt. Keep it at 2-3%, and you'll die before you notice, apparently.

You know about inflation, don't you? Even if you don't know about "inflation" specifically, most people of employment age would have at least heard of the concept of "prices going up". In that case I'm not sure what type of deception (ie. scam) is going on here.

Businesses obviously benefit from paying their employees less in real terms over time. This happens automatically for them due to inflation.

Do you think government can influence inflation? Do you think big business can influence government?

Welcome to fiat currency backed capitalism

How does a thing called "consumer price index" exclude things like energy and food? How is that even close to honest? Friends of mine in CA with $1,000 PG&E bills. Food prices through the roof, $9 for a goldfish carton. But yeah let's exclude energy and food, because consumers - humans, don't require such things.

It doesn’t. Multiple CPI figures are provided. If you want the one that includes everything, then use that one.

> Over the last 12 months, the all items index increased 2.9 percent before seasonal adjustment.

> The index for all items less food and energy rose 0.2 percent in July, after rising 0.1 percent the preceding month.

The CPI inflation rate gets lower when you include food and energy, not higher. OP simply chose the higher number (3.2) for the HN headline, not the most accurate one (2.9, which includes food and energy)

You're half right. In a sense, food and energy should be included, but the problem is that they're much more volatile--you'd reliably have a huge surge of inflation in the US as gas gets more expensive in the summer, and deflation in the winter as prices go down. This would make it much harder to understand the numbers you were seeing.

"Core inflation is 4%, which is high" is understandable, "Inflation is -1%, but that's actually bad because it's November" is going to make communication basically impossible for non-experts.

I've always thought there ought to be a way to do some kind of damped average, so that you can detect "food has been rising in price for the past few years", but ignore "gas prices surged after memorial day", but it's hard to think through the details and find something that makes sense.

Jobs numbers work the same way, btw...we adjust for seasonal labor.

these are 12 month numbers

The implication that this avoids seasonal variation is accurate, but there are also other transitory supply shocks. I believe even accounting for seasonality, food and oil prices are more volatile than other items.

Also, I may be wrong about this, but I'm not clear that you can easily do comparisons like "inflation has been X percent over the past 18 months" if you just do comparisons to 12 months ago.

Food and energy are sometimes excluded because they are more volatile and susceptible to supply shocks that don't reflect underlying inflation.

Like all bls, fed, & dol there are multiple series that are useful for different discussions. The “headline” rate for CPI includes food and energy.

And this is a national inflation number, of course there is variance by locality. Table 4 digs into some of that variance.

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