Friday, June 12, 2009

Restaurant Prices to Flow Into ‘Core’ Inflation Measure

I have no idea what prompted this from the Bureau of Economic Analysis, but the inflation gauge tracked most closely by the Federal Reserve will no longer exclude restaurant prices starting next month. The government plans to add purchased meals and beverages into the “core” inflation calculation — the one that excludes other food and energy costs — when it releases comprehensive revisions to its data at the end of July, WSJ reports.

The BEA had been releasing a version of its price index for personal consumption expenditures that excludes energy and all food products, whether bought at a grocery store or a restaurant

The July 31 reclassification means that food services — that is, restaurants — will be included in the “core” inflation measure. That’s the one Federal Reserve policymakers track most closely. (The changes do not affect the consumer price index, a separate inflation gauge from the Labor Department’s Bureau of Labor Statistics.)

The “purchased meals and beverages” category inched up with the surge in food prices last year. As would be expected from a consumer good, most of those menu prices haven’t come down with the recession, even though food commodity have declined over the past year.

1 comment:

  1. COLA is based on CPI, so the change won't increase the cost of social security or other inflation-linked government obligations. Maybe the Fed needs a more realistic inflation statistic to justify its eventual tightening.