Wednesday, December 21, 2011

November 2011 CPI: Prices Sticking

Some nice news for once – prices in November barely budged over October (log annual and monthly changes; 2000=100):


Increases in core prices remained uncomfortably high, both on annual and monthly measures, but overall increases in prices decelerated, mainly as aggregate food prices didn’t increase at all (log annual and monthly changes; 2000=100):02_food

Looking at the monthly chart, this isn’t unusual – so it isn’t a signal that inflationary pressures have abated, but rather we’re seeing a short pause.

I’m still pretty concerned about core price components, which are bearing out some of my thoughts regarding the path of prices going forward – I think it’s primarily services inflation. One could argue that this is a good sign, as it may be reflecting higher wage costs (aka higher income). But much of it is under the catch-all “miscellaneous” category, which isn’t helpful in trying to discern what’s actually going on.

Technical Notes:

November 2011 Consumer Price Index report from the Department of Statistics


  1. Wats ur take on inflation over next ten years?Certainly does not feel that its 2-3% especially on basic stuff like food,rents,fuel etc.Think over last ten years most of these costs have doubled.
    Can you please help us to understand why the official CPI is low but our pain is severe.

  2. Ten years is a long time, but I don't see overall inflation being any much higher than before.

    On the issue of what it "feels" like compared to the official figures, first you have to recognise that the CPI is made up of many different items, some rising faster than others. Food prices have definitely risen faster, while clothing prices have actually dropped about 15% since 2000.

    So if you eat more than you shop for clothes, or if you travel a lot (or if food and fuel is a bigger portion of your household budget), your personal experience of inflation will be that it's higher than the government figures. If you're in a higher income bracket, you'll probably be wondering "what inflation?"

    That's why I've taken to showcasing three different indexes, rather than the CPI alone. Basically, I split up the CPI into two separate categories - food and transportation (the "Pain" index), then everything else (the "Core" index).

    The numbers for food and fuel more closely approximate what people "think" inflation actually is - the increase in the Pain index averaged over 4.6% this year alone. Core inflation is much lower at an average of 2.2%.