How Many Ways Can You Pretend Higher Inflation Is Not Higher Inflation?

Here’s a test. In June 2023, inflation measured by the consumer price index (CPI) on a year-over-year basis rose 3.0%. In July, the same measure rose 3.2%. So, the rate of inflation went up in July, right? Well, that’s the technically correct answer, but you wouldn’t know that reading the mainstream financial media.

The media was filled with stories about how inflation went down or rose “less than expectations” or otherwise didn’t go up as much as expected. This article is a good example. Instead of just reporting the fact that inflation went up, the financial media tortured the data to show the opposite.

The first move was to shift the definition of “inflation.” This is where the Wall Street spin comes in. They ignore CPI and talk about “core” CPI which excludes energy and food prices.

Some analysts also exclude housing prices to get to what they call “super-core” inflation. Others ignore CPI entirely and focus on another inflation series called personal consumption expenditure (PCE), which has its own core and super-core versions.

There’s only one problem with all of this statistical gaming. Most Americans spend most of their money on food, gas, home heating, and housing costs. When you ignore those elements in any inflation calculation, you’re elevating statistical sleight-of-hand over the real concerns of everyday Americans.

It also gives policymakers a false sense of comfort. If you’re relaxed about inflation because super-core PCE seems moderate, you’re missing the big picture.

The Fed needs to address CPI head-on and ignore the statistical slicing and dicing. If not, there will be a political price to pay in 2024.

In fact, energy prices have been surging ahead of most other prices in recent months. That’s why CPI is going up even as other inflation metrics appear more tame.

Today’s national average price for regular gasoline is $3.86 per gallon. One month ago, that same gasoline was $3.56 per gallon. That’s an 8% price increase for gas in just one month.

Americans pay more attention to the price of gas at the pump than they do to super-core PCE. It’s not clear when politicians and policymakers will get the message.

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