When I recently wrote that the Consumer Price Index (CPI) had increased 17.5% since before the pandemic, I received emails from readers challenging my data; they explained that their expenses had increased a lot more than 17% in the past 3.5 years.
So, I checked my figures.
From January 2020 through June 2023, the CPI increased 17.5%, so my data was accurate. But while I reported the correct data, depending on how you spend your money, it may have been terribly misleading.
I looked a little closer at the CPI calculation, to see which components have experienced the biggest and smallest price increases. Please bear with me. There are a lot of numbers in the next 7 paragraphs.
According to the official CPI statistics, the price of food, both for home consumption and away from home, increased more than 23% in the 42 months since January 2020. The CPI calculation for the cost of electricity increased 23.1%. New car prices increased 23%, while used car prices are up almost 41%. Hotel rates increased 24.5%.
Assuming those statistics accurately reflect actual consumer prices, how did the entire consumer price index increase less than 18%?
The official statistics report that prices of both medical care and apparel have increased only 7%. Those figures deserve a deep dive, as neither passes the smell test.
Those aren’t the only official inflation figures that require suspension of logic to accept. According to official government statistics, airline fares have declined 8% since the end of 2019. How does anyone report that with a straight face?
Some of the federal government statistics seem to contradict. From January 2020 through July 2023, the Bureau of Labor Statistics (BLS) says the price of gasoline increased 22.7%, while the U.S. Energy Information Administration reports that the average price of a gallon of regular gasoline increased 42%. According to the official CPI calculation, the price of housing has increased 19.7%, while the U.S. Census Bureau reports that the median home sales price increased 27.2%.
The BLS tells us that average hourly earnings increased 18.9% since January 2020, essentially equal to the reported 17.7% increase in consumer prices. If these figures are even close to reflecting a person’s actual expense increases, the inflation of the past 3.5 years would be unnoticeable. Yet, according to polls by the Pew Research Center, Gallup, NBC News, NewsNation, Axios, and even a place called the Marxist Institute for Public Opinion, the most important problem facing Americans is inflation.
Washington statisticians are not intentionally manipulating the reported CPI. They are distilling a lot of complicated and volatile data series into a single number – suggesting a false precision that recently doesn’t match most people’s reality.
David Moon is president of Moon Capital Management. A version of this piece originally appeared in the USA TODAY NETWORK.