A March CNN poll shows 91% of the population is concerned with inflation. Why such a staggering high number? Because the Consumer Price Index or CPI is up. What is the CPI? The CPI takes all price increases into consideration. Core inflation takes out energy prices and food prices because they change more rapidly and have more spikes and valleys. But here is a line I like from an article from Elizabeth Spiers called The Great Inflation Cover-Up “At what point does a consistent trend upward stop being “price volatility” and start being a material “trend upward”? and what if some of those trends – particularly in the energy sector – are irreversible?”
Core inflation gets the press because it is what the Federal government uses. But the spikes and valleys I mentioned before are leveling off and becoming inclines that average a higher rate of increase than in the past. Why this is important is similar to a piece I wrote a couple of days ago called Change Blindness. When you go to the grocery store to buy milk, you have an idea in your head of how much it should cost. You are looking for that cost. When it shows up not looking like what you expected you are rattled and you take notice. A result is that you stop buying other goods because you need milk. But isn’t just milk going up, so if gas. And gas is worse than milk because so many industries rely on shipping. So when shipping costs go up, so does everything else.
The economy is obviously down and jobs are tight but those employed aren’t getting raises at the rate that is keeping up with these cost increases. The middle class in the US is getting poorer.
Working Thoughts 