Three big items in the CPI that under count inflation

Consider these charts, showing a large gap between the CPI and actual prices paid. The auto chart is on the home page of this blog but not visible on smart phones:

Of course people don't buy homes and automobiles every month.  And autos often get mandatory extra safety features, that you have to pay for, whether you want them or not. Apartment and home rents usually don't change for one year at a time.  

The bottom line is the CPI is likely to understate inflation for most people. But YOUR personal inflation rate depends on the goods and services you actually buy, not some government index. If the market price of a product you buy goes up, and you then decide to buy a cheap brand at a dollar store, your actual price may go down. 

 

We used to buy a tub of Philadelphia cream cheese every week at the supermarket. The price kept going up and is now $4.29. Our favorite flavor has been out of stock for months. The generic Meijer's brand is $2.19 for the same 8 ounce size size. So that's what we buy now -- a 49% price reduction.  And we buy two every week, instead of one! The CPI would not capture such a substitution.

I do a weekly SUPPLY CHAIN SURVEY while shopping at the local, huge Meijer's supermarket. The out of stock problem is near the worst level of the past year, but has improved in the last two weeks. I also survey 15 specific items that we buy every week. Last Sunday, a record 9 of the 15 were out of stock. That forces us to try a different brand. Whatever is available. One week there were no Post Raisin bran cereal boxes, for one example. So we bought the Meijer's brand raisin bran. It tastes about the same, and was cheaper. We only buy Meijer's brand now, if it is in stock. The CPI would not reflect that substitution.

https://el2017.blogspot.com/2022/06/supply-chain-survey-6522-sunday-morning.html

For another example, I buy a lot of Dole cole slaw mix in the supermarket every week to make my own cole slaw. I use Miracle Whip, white vinegar, Sweet & Low artificial sweetener and a secret ingredient. Cole slaw from a deli usually has a lot of sugar in it, which I don't want. A few weeks ago the 16 ounce Dole cole slaw mix for $1.89 suddenly became 14 ounces for $1.89. That's called "shrinkflation".  If the CPI had included Dole cole slaw mix, it should adjust for the smaller package, but the difference is almost impossible to notice, and would be easy to miss. I didn't notice until after we brought them home.

Sweet and Low artificial sweetener had been about $4 for 100 packets in the supermarket. A generic brand was only $1 for 100, for many years in a local Dollar General store. So that's what I bought. But the generic brand has been out of stock since late 2021. Dollar General substituted the same Sweet and Low as in the supermarket, but with 100 packets for $2. No more $1 generic brand, so that was a 100% price increase for me. Last week, the $2 Sweet and Low suddenly became $2.35 -- a +17.5% increase. I bought enough for the next year. Pretty complicated to keep track of just one item.  If Sweet and Low was included in the CPI, they would use the price from one source. Probably a supermarket. They would miss my actual experience at the Dollar General store in the past year, from $1 to $2 to $2.35 -- up +135%.