Monday, August 29, 2011

More On 3-Year Inflation Being Lowest in 54 Years

Percent change in price from July 2008 to July 2011:

Item  3-Year % Change  
Natural Gas -31.60
Fuel Oil -20.65
Orange Juice9.23
Bread 9.32
Ground Chuck17.50

As a follow-up to this CD post featuring three-year inflation rates, the chart above shows the three-year percentage change in prices from July 2008-July 2011 for the items in the "Top Picks" from the BLS website.  Of the 16 items in the list, 11 have decreased in price over the last three years, five items have increased, and the average three-year change was -5.31%.  

Over the most recent three-year period through July, overall prices have increased by only 2.87% for the CPI: All Items index, or 0.95% per year on an average annual compounded basis, and that's the lowest three-year inflation rate since January 1957. 

Maybe this helps explain the mixed opinions about consumer prices and inflation: Over a three-year period, there has been almost no overall inflation at all, and there has actually been deflation for many consumer items since the summer of 2008.  Over a shorter period like one or two years, consumer prices have been rising faster than previously, so it does seem like inflation is increasing, even though over a longer period like three years inflation is almost non-existent.   


At 8/29/2011 8:25 AM, Blogger morganovich said...

isn't this a bit like saying, "it was dark earlier even though it's sunny now, so it's not really getting bright"?

inflation has shown dramatic upticks in the last 18 months and (on a one year basis) is right at the highs.

the non adulterated measures (like import and export prices) are showing double digit increases.

it is only through a whole pile of subjective "adjustments" that CPI is reading "only" 3.6%.

At 8/29/2011 8:45 AM, Blogger Nick said...

Based on what I observe when going to the supermarket, I find those milk numbers highly suspect.

At 8/29/2011 8:49 AM, Blogger juandos said...

Well from the same BEA web page I pulled up 'their' numbers for the following:

Electricity per 500 KWH
Utility (piped) gas
Gasoline, all types
Gasoline, unleaded regular
Bread, white
Ground chuck
Chicken, fresh, whole
Eggs, grade A, large, per doz
Apples, Red Delicious

Well everything except milk, eggs and natural gas (milk and egg pricing doesn't reflect the local experience) as shown on the BEA site seems to have gone up rather substantially since Jan. of '08...

I don't really know much about apples and bananas since I don't eat them that often...

Looking at the price of coffee makes me wish I'd of bought into coffee three years ago...:-(

At 8/29/2011 9:00 AM, Blogger McKibbinUSA said...

Just more evidence of the ongoing Main Street Depression...

At 8/29/2011 9:35 AM, Anonymous Anonymous said...

Something does not add up. My equal payment utility bill made up of just natural gas and electricity went up each of the last three years for the same amount of usage. I'm about 50% natural gas and 50% electric on a yearly basis (gas higher in the winter and electric higher in the summer).

Natural gas is down 32% and electricity is up 3%, so where is my savings from the huge natural gas price decline? I think I know that answer.

At 8/29/2011 9:58 AM, Blogger Buddy R Pacifico said...

2008 is good place to show that fuel oil (heating oil) is down in price. If we look at a ten year price chart for heating oil then we can see a peak in 2008.

So, how much did heating oil go up over ten years? 339.54%. I don't know why it peaked in 2008 but it is making its way back up.

At 8/29/2011 10:00 AM, Blogger JPINTX said...

Where did the data come from? I looked at my weekly charts for Gasoline, Heating oil, Live cattle, all the grains,frozen OJ, sugar etc. Admittedly these are futures contracts, however the method used for the charts is for the prompt contract, and there is not that much difference between cash and prompt futures. All of these charts show large increases. Only Nat Gas shows a decrease. So I call BS on this.

At 8/29/2011 10:06 AM, Blogger JPINTX said...

OPPS, I must retract my previous post, I failed to set the chart machine correctly :-(

At 8/29/2011 10:37 AM, Blogger Stan said...

I shop weekly at four different grocery stores nearby. The prices of everything are up and markedly so. I'd love to know where someone is getting these prices.

At 8/29/2011 11:01 AM, Blogger Bill said...

Wow. Talk about cherry picking data to fit your preconceived notions. If you look at the charts of nearly every commodity, prices are up dramatically for the last 2, 5 or 10 years. Only by looking at some commodity prices in isolation and comparing them to the previous peak of 2008 can you find some slight "deflation" but this is obviously not the true picture of what is happening and many of these commodities are nearing their previous highs. On a personal note, my residential rental units are now renting for all time record rents (a good inflation problem to have in my case).

The reality is that prices across the board are rapidly rising now and it appears as if this will continue for the foreseeable future. This has been the goal of Bernanke and co and clearly they have achieved their aims.

At 8/29/2011 11:10 AM, Blogger Benjamin Cole said...

Hats off to Dr. Perry, a rare independent thinker.

I do not always agree with Dr. Perry, but he does not leap when the GOP carnival-barkers or gold fetishists say "leap."

Inflation is at record laws.

Why is the Fed fighting inflation, instead of stimulating growth?

At 8/29/2011 11:11 AM, Blogger Rufus II said...

Yeah, July of '08 is when oil peaked at $147.00/bbl, and gasoline peaked at $4.11/gal.

You start this analysis in the Summer of '09, and it will look one heck of a lot different.

At 8/29/2011 11:14 AM, Blogger Bill said...

BTW, the best way to defeat inflation (at least temporarily) at the grocery store is to buy vegetables and fruit at your local farmers market. You can buy things there for 1/3 to 1/5 of the grocery store price. Then, you get meats and other items when on sale at the grocery store. I have adapted to the stagflation in this way.

At 8/29/2011 12:01 PM, Blogger geoih said...

How exactly do you add the values of all of these different commodities? How many eggs is equal to a kilowatt-hour of electricity? How many oranges equal a gallon of gas?

The whole inflation calculation exercise is a joke. Maybe next we can aggregate love, beauty, anger and envy.

At 8/30/2011 3:45 AM, Blogger JG said...

As I write this the markets are expecting inflation of only 1.07% over the next two years, and just 1.63% over the next *ten* years.

No offense to anyone, but I find this rather more persuasive about the state of inflation than subjective, selected supermarket anecdotes.

At 8/30/2011 6:03 AM, Anonymous Anonymous said...


Selected supermarket anecdotes could be much more accurate at the individual level than any CPI or other index. Aggregated data methodology collected from everyone could be applicable to no one. Try finding the "average" house on a street that has a wide swing in property values.


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