The purchasing power of the consumer dollar has dropped by 0.8% in May, according to the BLS, and by 2.4% over the past three months, the biggest three-month plunge in purchasing power since 1982.
Headline
consumer prices rose 5% year over year in May, the fastest pace since
August 2008 and higher than Wall Street expectations.
The 3.8% rise in the core inflation rate, which excludes food and energy prices, was the sharpest increase in nearly three decades.
Surging used car car prices helped drive much of the inflation gains.
The 3.8% rise in the core inflation rate, which excludes food and energy prices, was the sharpest increase in nearly three decades.
Surging used car car prices helped drive much of the inflation gains.
I usually don't present price indexes because they significantly under count inflation.
The CPI attempts to measure price changes of the same item over time.
But when products are improved, whether you notice the improvements or not, they say that's not inflation, because you’re getting more as you pay more.
These are subjective “hedonic quality adjustments” that understate the actual prices consumers have to pay.
The CPI for used vehicles, for example, shows the index in 2020 was below where it had been 20 years earlier.
That's nonsense.
But in fact, used vehicles got a lot more expensive, especially in May and April of 2021, and finally pushed the index above its level 20 years ago.
Hedonic quality adjustments are applied for improvements in new vehicles over the years,
Example: Changing from a three-speed automatic transmission to a six-speed electronically controlled transmission.
Estimated price increases for “quality improvements” are removed from the CPI.
New Vehicle CPI hedonic quality adjustments almost eliminated their CPI price inflation, even though the vehicles are actually a lot more expensive.
More nonsense.
In May 2021, year-over-year new vehicle prices still rose 3.3%, the biggest increase since 2012, in spite of the hedonic quality adjustments.
The New Vehicle index rose until the mid-1990s, after which the hedonic quality adjustments forced the index down.
The CPI makes no attempt to include actual home prices.
The CPI attempts to measure price changes of the same item over time.
But when products are improved, whether you notice the improvements or not, they say that's not inflation, because you’re getting more as you pay more.
These are subjective “hedonic quality adjustments” that understate the actual prices consumers have to pay.
The CPI for used vehicles, for example, shows the index in 2020 was below where it had been 20 years earlier.
That's nonsense.
But in fact, used vehicles got a lot more expensive, especially in May and April of 2021, and finally pushed the index above its level 20 years ago.
Hedonic quality adjustments are applied for improvements in new vehicles over the years,
Example: Changing from a three-speed automatic transmission to a six-speed electronically controlled transmission.
Estimated price increases for “quality improvements” are removed from the CPI.
New Vehicle CPI hedonic quality adjustments almost eliminated their CPI price inflation, even though the vehicles are actually a lot more expensive.
More nonsense.
In May 2021, year-over-year new vehicle prices still rose 3.3%, the biggest increase since 2012, in spite of the hedonic quality adjustments.
The New Vehicle index rose until the mid-1990s, after which the hedonic quality adjustments forced the index down.
The CPI makes no attempt to include actual home prices.
The last charts below is one month old -- all the other charts include today's May 2021 CPI data:
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