Tuesday, November 9, 2010

Krugman: Grocery Prices Add 25% Beyond Core Inflation

Paul Krugman is still on his deflation kick. He runs this chart of grocery prices versus core inflation.

He writes:
What we see is that grocery prices have tended to rise faster than inflation as measured by the core CPI, but not by all that much: over the past 10 years the grocery inflation rate has been about half a point faster than the core inflation rate.
Say what? Not all that much?

If you look at the chart, you can see that core inflation, the burgundy line, never climbed above 2%. So if we assume 2% to get a rough approximation of core relative to grocery prices, we will actually be conservative and underestimate the actual difference. Let's also take Krugman's estimate that grocery inflation is an additional 50 basis points beyond core. This means that, based on these assumptions, that grocery price inflation over the last 10 years has climbed 25% beyond core.

Krugman calls this "not all that much." It may not be for him, since he collects huge royalties from his propaganda books and he, like Austrian economist Friedrich Hayek, received a Nobel Prize cash award, BUT for someone on a fixed income, who spends a good part of their budget not on the misleadingly Nixonian named "core" items, but on groceries, it is a very big deal.



  1. To point to that chart for an argument and ignore compounding seems intentionally disingenuous. Or, is Krugman really that clueless.

  2. Wouldn't it be more like 28% from the compounding effect?