The CPI Isn’t the Only Inflation Index Out There

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Inflation is on everyone’s mind.  The CPI or Consumer Price Index is the one most people think about.  Many Americans have differing opinion about the index because they see the items they buy most often moving in a different direction or speed than the CPI.  There are other measures out there.  What are they?

  1. Consumer Price Index (CPI).  This is the most often quoted measure, yet it actually has three variants.  There’s the CPI excluding the food and energy components, since they are considered quite volatile.  (1)  The December 2021 number was +7.0%, excluding food and energy, it was up 5.5%.  This is a 12 month % change. (A)
  2. Personal Consumption and Expenditures (PCE).  This is a variation tied to consumer spending.  There’s a “core” version that excludes food and energy.  The November 2021 number was +5.7% vs. 12 months ago. (B)
  3. Everyday Price Index (EPI). The American Institute for Economic Research (2) developed an index that tracks costs of goods and services where the average person spends money.  It includes practical items like alcoholic beverages, gardening/lawn care and pet products.  The November 2021 number was up 9.3% vs. 12 months ago. (C)
  4. Food at Home Index.  This is a component within the CPI calculations.  It primarily tracks grocery prices.  This is useful for people whose primary point of reference is what they pay when grocery shopping.  According to Fortune magazine, the government reported the index was up 6.4% in November lover the previous year, but categories like meat, eggs, fish and poultry increased by 12.8%. (3)  The December 2021 figure shows an increase of 6.5% over 12 months. (D)
  5. Misery Index.  This was developed in the 1960’s.  It’s the combination of the inflation rate and the unemployment rate.  It was developed by the economist Arthur Okun. (4)  The December 2021 number was 10.94%. (E)
  6. French Laundry Inflation.  This isn’t a formal index.  The Economist magazine, in it’s article “The Economic History of Restaurants” measured the changes in price between 2007-2020 at the famous restaurant of the same name. (5)  It’s an indicator (of sorts) of the rising prices in gourmet restaurants.  This was referenced in the article but doesn’t appear to be actively tracked.
  7. Luxury Goods Index.  Forbes tracks an index relating to luxury goods.  It’s the “Cost of Living Extremely Well” Index or CLEWI. (6)  It includes obvious components like buying a pair of Gucci loafers, a Hermes handbag, an Audemars Piguet watch, Frette bedsheets and a Louis Vuitton Bandouliere Keepall.   It also includes tracking the cost of buying a yacht, a private plane, a yacht and a Rolls Royce.  The referenced article shows the index was up 10.1%  The time period is likely tied to publication of the Forbes 400 list but doesn’t reference the month to month period measured.
  8. New house index.  You are familiar with the S&P/Case Shiller index tracking the price of new construction single family homes in the US. (7) (9) As of October 2021 the US National Index rose by 19.08% over the 12 month period. (F)
  9. Rent Price Inflation.  There is an official component within the CPI index, but there’s also the Zillow Observed Retail Index or ZORI. (8).(9)  For the 12 month period ending in October 2021, the increase was 14.3%. (G)

People often complain prices are rising faster than the reported numbers indicate.  Obviously there is a time lag, but people consider certain costs as having a greater impact on their lives.  You can do some exploring to gain a greater understanding of their point of view.

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Footnotes:  Background on Indexes:

  1. https://www.marketplace.org/2019/09/23/4-ways-to-measure-inflation/
  2. https://www.aier.org/article/drop-in-gas-holds-aiers-everyday-price-index-down-in-december/
  3. https://www.ers.usda.gov/data-products/food-price-outlook/summary-findings/
  4. http://www.miseryindex.us/
  5. https://www.economist.com/christmas-specials/2021/12/18/an-economic-history-of-restaurants
  6. https://www.forbes.com/sites/andreamurphy/2021/10/10/its-getting-more-expensive-to-live-like-a-billionaire/?sh=4d3636c33804
  7. https://www.investopedia.com/terms/s/sp_case_shiller_us_nhpi.asp
  8. https://www.zillow.com/research/data/
  9. https://www.whitehouse.gov/cea/written-materials/2021/09/09/housing-prices-and-inflation/

Footnotes: Recent figures quoted:

A. https://www.bls.gov/cpi/
B. https://www.bea.gov/data/personal-consumption-expenditures-price-index
C. https://seekingalpha.com/article/4474932-aiers-everyday-price-index-posts-its-12th-consecutive-increase
D. https://www.bls.gov/news.release/cpi.nr0.htm
E. https://inflationdata.com/articles/misery-index/
F. https://www.spglobal.com/spdji/en/index-family/indicators/sp-corelogic-case-shiller/sp-corelogic-case-shiller-composite/#indices
G. https://www.zillow.com/research/october-2021-market-report-30299/