The family is still down for the count with a bad cold, and work outside market hours has been suspended for now. Hopefully, we can use the downtime around the holidays to full recover. Sorry for any inconvenience.
Yesterday's core CPI number was a blowout. This morning, are treated to two sentences in one headline at WSJ:
The U.S. farm economy is booming amid a robust price rally in grain, livestock and other agricultural commodities. Core consumer prices fell last month for the first time since 1982, bringing the underlying inflation rate to a 40-year low.
The word that comes to mind when we read these two sentence together is: oxymoron. I mean, how does that first sentence work with the second? It goes back to the item structure of the Consumer Price Index:
The changes in the 1998 market basket will reflect and anticipate shifts in the consumer marketplace. This revision will result in more substantial changes to the item structure. Not only will there be new components for new goods and a reduction of the structure for less important ones, but a reorganization of sectors of the market basket such as "food away from home," "medical care," and "communications" will be undertaken to account for the modern views of these areas. This article summarizes the changes being made and their impact on the Consumer Price Index.
Take some time out to read the full text, and you'll be stunned at the assumptions being made. The idea is that the core inflation rate should reflect items that are non-volatile, but if we end up leaving out all the things that people actually need in real life, what kind of calculation is that? Personally, I believe the number has been engineered so that inflation-indexed pensioners get short-changed. Ever the cynic.
03.12.17 08:46 #