Thursday, June 23, 2011

Beyond CPI: Price Inflation in the Real World

Because of a short downtrend in oil prices, gasoline is down a bit from its recent highs, but this doesn't mean prices in general are falling.

The Bureau of Labor Statistics tracks 76 items ranging from ground beef to soda to dairy products and the majority are climbing.  During April, the BLS found prices gained on 45 of the items it monitors. Over the past year the trend is much stronger, with 66 of the 76 items higher in price.

According to CNBC, just in April—the most recent month for which data is available—grapes went up nearly 30 percent, cabbage jumped about 17 percent and orange juice climbed more than 5 percent.

Over the last year, coffee is up 40 percent. Celery is 28 percent higher while butter prices rose 26.4 percent. Rounding out the top five are bacon, at 23.5 percent, and cabbage, at 23.3 percent.

In April, grapefruit rose 15 percent. Smoked ham was 7 percent higher and potatoes jumped 6.1 percent. Broccoli rose 2.5 percent in the month and about 12 percent for the past year.

This is why price inflation seems higher than the CPI number shows, because the prices of the things you really buy are up far beyond the CPI number.

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