I’ve been worrying about periods of high inflation since I started writing these posts over seven years ago. It wasn’t until these last 12 months that my worries were matched by reality.
It doesn’t help that the politicians & media pundits keep trying to put a positive spin on things. The headlines have been ridiculous:
Part of the challenge is I don’t know if the inflation measures themselves are even accurate.
Prices ‘feel’ like they are much higher than the official CPI of +7.9% versus year ago to me. That’s not scientific, of course, but I’ve never been sure we can trust the government is giving us the straight story on how much the dollar is losing in purchasing power.
I also don’t have a good alternative.
Since the mid-2010s, the Federal Reserve has emphasized the ‘Personal Consumption Expenditures’ index (PCE) as their preferred measure of inflation. They say it’s more accurate, but It’s grown at a slower rate than CPI: +6.1%. Still, the PCE is also the highest numbers since 1982.
The ‘Producer Price Index’ is another alternative. It’s up more than CPI: +10.0% in February. That feels closer to what I am seeing at the store and at the low-end of what I am hearing from organizations I’ve been involved with (corporate & non-profit).
It doesn’t help that the government has used different formulas to measure inflation. There is a website called ShadowStats.com that purports to share CPI numbers using the formulas the government used prior to changes in 1980 and 1990. They are calculated more conservatively now than in the past.
ShadowStats shows the current CPI over +15% – even slightly higher than the early 1980s. Some economists claim that was a better way to measure inflation, but others say the measures needed to change.
If we take all of these numbers together, I guess we could say we have a likely range of inflation from +6-15% right now. I’m thinking we are closer to the midpoint of that range (~8-9%) than the low end (which the Fed is using).
Like the weather, I can’t do anything about inflation but I still wish we could agree on what the temperature is!
What is your read of inflation right now? Do you trust the government’s measurement?
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