A key measure of inflation doesn't take into account key expenses that have skyrocketed for consumers since the pandemic, such as interest on credit cards and car loans, tips and even fees paid to babysitters and dog walkers. .
The Consumer Price Index (CPI), published monthly by the Bureau of Labor Statistics, measures the average change over time in the prices consumers pay for a representative basket of goods and services.
But experts say consumers' daily expenses include much more than what the CPI captures, including gas, groceries, medical care, travel and rent.
“While the CPI captures goods and services purchased for consumption, there are other things that affect the cost of living,” says BLS economist Steve Reed. told Bloomberg News.
“Therefore, realistic pricing is not possible.”
CPI measures how much is spent on certain goods and services, but it doesn't take into account the interest rate that applies to credit card debt that rolls over each month.
Americans have approximately $628 billion in unpaid credit card debt. That's a lot of money since typical interest rates are around 22%.
The average rate for all accounts in August 2022 was 16.27%, 25% lower than last month.
BLS analysts who compile CPI data also view housing as an investment decision, not an everyday expense. Therefore, CPI does not take into account home prices, mortgage payments, or property taxes, which can amount to thousands of dollars a year depending on price fluctuations.
U.S. single-family homeowners paid a total of $363.3 billion in property taxes last year, a 6.9% increase from $339.8 billion in 2022, according to ATTOM, which analyzed 89.4 million homes nationwide.
The 6.9% growth was the largest in five years.
The report also found that the average tax bill on a single-family home rose 4.1% last year to $4,062. It then increased by 3% in 2022.
Another metric, homeowners insurance, is not included in the CPI calculation, but a related category called “tenant and household insurance” is considered as part of the shelter index.
Experts say headline inflation is likely to rise further if homeowners insurance is incorporated into the CPI.
“The CPI does not necessarily measure your own experience with price movements,” the BLS says on its website.
“National averages reflect the price experiences of millions of individuals; they rarely reflect the experiences of any particular consumer.”
Lottery tickets, marijuana use, parking ticket payments, and other legal expenses are also not factored into CPI.
Inflation fell last month to its lowest level since it first started rising more than three years ago.
Consumer prices in September rose only 2.4% year-on-year, slowing from August's 2.5% and the smallest annual rate of increase since February 2021.
Measured monthly, prices rose 0.2% from August to September, the same as the previous month, the Labor Ministry announced earlier this month.
However, excluding volatile food and energy costs, “core” prices, a measure of underlying inflation, continued to rise in September due to increases in medical, clothing, car insurance and airfares.
Core prices in September rose 3.3% from the previous year and 0.3% from August. Economists closely monitor core prices, which are usually a better indicator of future inflation.
with post wire
