How to Actually Read the Inflation Report

The Bureau of Lying Statistics released the monthly consumer price index report today.  Investors were hoping for a somewhat subdued report and they generally got what they wanted.  But there are some really bizarre calculations underlying this index, which does not reflect the reality of what is happening to prices for the average American.  In general the prices of goods were flat or fell, but prices for services rose.  As usual I encourage you to look at the release and the tables for yourself, you can see exactly what I do.  (BLS Release)

And what you will see is that certain big-dollar items are actually still going up rapidly.  Unfortunately, these are all necessities.  For example, shelter–rent or the cost of owning a home, in the 12 months ending in July has increased 5.1%, transportation is up 8.8%, car insurance increased 19%, while food prices overall grew 2.2%, the cost of eating out rose 4.1%.  Electricity prices were up 4.9% (what happened to green energy being cheaper?). And my favorite absurdity, medical care prices supposedly rose only 3.3% in the last year while health insurance costs declined four-tenths of a percent?  This is a joke as anyone in health care knows.  Health insurance premiums and out-of-pocket costs are rising at at least 5% annually and health care prices at a similar clip.  So let’s see, housing, food, transportation, electricity, health care–yeah, no biggie if those costs are rising at that kind of rate.  And that explains why the average consumer thinks, quite rightly, that prices are continuing to rise rapidly–the prices that are important to consumers are.