Friday, May 17, 2013

US CPI Falls at Fastest Rate since 2008, but could it Still be Overstating the Rate of Inflation?

According to data released yesterday by the Bureau of Labor Statistics, the U.S. Consumer Price Index fell in April at an annual rate of -4.35 percent. It was the second consecutive monthly decrease and the fastest rate of decrease since late 2008, when the economy was in free fall.

The April decrease was largely attributable to lower gasoline prices, as have been almost all of the gyrations in the index since the start of the year. The core CPI, which removes its food and energy components, shows much less month-to-month volatility. It rose at an annual rate of 0.6 percent in April, its slowest rate of increase since 2010. The following chart shows that both all-items and core inflation have trended gradually downward over the past two years.



Many people are skeptical of the CPI data published by the BLS. For various reasons, they believe that the true cost of living is rising much faster than the CPI. Given that perceived inflation is generally higher than the CPI indicates, it will come as a surprise to learn that some professional economists think the CPI overstates the rate of inflation, and does so by an increasingly wide margin. >>>Read more

Follow this link to view or download a classroom-ready slideshow with charts of the latest inflation data.

No comments:

Post a Comment

Post a Comment