The 8,096 Faces of Inflation
A quick post on the 7.5% inflation number reported yesterday (Feb.10)
Perhaps to no surprise, inflation is still running hot, coming in at 7.5 percent in January 2022. This estimate was released yesterday by the Bureau of Labor Statistics. Recall, the rate was 7.0 and 6.9 percent in December and November, respectively (as discussed here).
So, what does this mean for you?
First, realize that the 7.5 percent estimate for January 2022 is a broad measure of inflation, calculated from the Consumer Price Index for Urban Consumer (CPI-U). The CPI-U represents a national average that tracks the prices of about 80,000 goods and services across 75 “urban areas” (you can read about how the CPI-U is created and how the prices are tracked here).
Yes, you read that correctly . . . 80,000.
That 80,000 represents the “basket” of goods and services that matter to consumers. This begs the question, does any one of us actually purchase 80,000 different goods and services in a year? No, of course not.
Hence, as far as inflation is concerned, not all is created equal—what matters for your cost of living may be different than mine or anyone else’s (as concisely articulated by blogger and podcaster, Ben Carlson, here). What matters for you is what’s happening to the price of the goods you typically buy and how that hits your household budget (even if Jeff Bezos buys similar stuff that you do, it’s going to hit him differently. . .or you could imagine that to be the case).
How can you get a better estimate of your personal rate of inflation? Well, the good news is the Bureau of Labor Statistics has you covered. The BLS produces no less than 8,096 possible variations and permutations of the Consumer Price Index.
Yes, you read that correctly . . . 8,096.
And those variations and permutations are just for the Consumer Price Index for Urban Consumer (CPI-U). That number does not include the many other indices the BLS produces (such as the Producer Price Index, or Urban Wage Earners and Clerical Workers (CPI-W)).
The 8,096 various versions of the CPI give you inflation numbers for where you live—regions and cities—break it down by sector (health care, transportation, etc.) and by specific stuff—alcohol, restaurant meals, apparel, you name it. You can find all of this on the BLS website through their search portal, which contains multiple options for a data search. Here’s a snapshot of one such option:
(You can see where I grabbed the 8,096 number from. I should add, too, I am being somewhat sensationalistic by emphasizing this number. Some series will include seasonally adjusted or non-seasonally adjusted versions, and that sort of variation.)
Your Inflation
Now, say you want to compare regions, such as the Northeast versus the West.
The BLS has that:
Versus . . .
Based on the comparison between these regions, prices are higher, on average, in the West (the data goes back further in the downloadable files).
(Note, the series are reported by the BLS at the monthly frequency; here I report the annual perspective. The annual percentage change numbers shown in the figures are calculated as the percent change from one December to another, unless otherwise noted.)
Aside from focusing solely on the region, say you were interested in what you buy either very often, or something that makes up a notable portion of your budget. For example, say you are a sartorial enthusiast, and you want to see what is happening with the price of apparel and you live in the Midwest.
The BLS has that:
Or, instead of apparel, you like to imbibe now and again, and you live near the Chesapeake Bay. How about alcoholic drinks in and near Baltimore, Maryland?
The BLS has that:
(Note, unlike the other series, this one is tracked every other month; as such, I used the average of those six months as the “annual” level for the index, then calculated the percentage change from that.)
And lastly, what if you have a sweet-tooth and like to load up on cakes, cupcakes and cookies?
The BLS has that, too:
I’m sure confectioners everywhere recall fondly the Great Cupcake Inflation of 2008.
The BLS has it all, in other words. And while the headline inflation numbers are important—and eye-catching—they show us a “macro” average. That is true of any macroeconomic statistic, of course. What you should keep in mind is how does the macroeconomic news of the day matter for you? Whether that be for your personal life, or for your professional life, where you may have a particular region, sector, or product to worry about.
The BLS makes it possible to answer that question, and they do so to an incredible level of detail. I suspect that the majority of folks out there do not realize the vast amount of information on our economy the BLS is tracking (the unemployment rate, productivity statistics, pay and benefits, surveys of how Americans spend their time and on and on).
Of course, in the daily news we only typically see the “big” statistics like the rate of inflation calculated from the CPI-U. And that makes sense. Who has the time or the inclination to do a deep dive into hundreds, if not thousands, of economic statistics? Nor would any journalist want to write, or an editor print, an article on thousands of economic statistics (and hope to keep their job).
But, the information is out there (at bls.gov), waiting for anyone to consume it. The catch, of course, is that it takes some data-sleuthing on the BLS’s website to find that detail. I get that people do not want to do that. However, should you have a curiosity and want help with sleuthing your price series of interest, email me. I will help.