CPI report: Data release shows Inflation stayed high

In his current role at Kiplinger, Dan writes about equities, fixed income, currencies, commodities, funds, macroeconomics, demographics, real estate, cost of living indexes and more. Mortgage rates (and other forms of long-term debt) are often impacted by rates set by government agencies. As the CPI increases and the government enacts policy changes to slow inflation, rates often increase. On the other hand, landlords may use CPI information to adequately assess what annual rent increases for renters should be. The monthly CPI release from the BLS leads with the change from the prior month for the overall CPI-U as well as its key subcategories, along with the unadjusted change year-over-year. The BLS detailed tables show price changes for a variety of goods and services organized by eight umbrella spending categories.

  1. The BLS refers to a variety of sources to calculate CPI, including the prices of goods and services from about 23,000 retail and service establishments throughout the U.S.
  2. Overall prices rose 3.2% from a year earlier, slightly up from 3.1% in January, according to the Labor Department’s consumer price index.
  3. User fees and sales or excise taxes are included, while income taxes and the prices of investments such as stocks, bonds, or life insurance policies are not part of the CPI.

The BLS collects about 80,000 prices monthly from some 23,000 retail and service establishments. Although the two CPI indexes calculated from the data both contain the word urban, the more broad-based and widely cited of the two covers 93% of the U.S. population. The basket of goods and services used for CPI includes popular items that Americans regularly purchase. The current cost of the basket is compared to its cost in the prior year, and then multiplied by 100 to determine the percentage.

The inflation rate is reported as a percentage and is often positive (assuming current market prices are appreciating). The Consumer Price Index (CPI) measures the monthly change in prices paid by U.S. consumers. The Bureau of Labor Statistics (BLS) calculates the CPI as a weighted average of prices for a basket of goods and services representative of aggregate U.S. consumer spending. This key economic metric is based on prices that consumers pay for goods and services throughout the U.S. economy.

Will the Fed lower interest rates in 2024?

One such factor is the CPI, as reactionary Fed policies directly impact economic growth, corporate profits, and consumer spending ability. The CPI report uses a different survey methodology, price samples, and index weights than the producer price index (PPI), which measures changes in the prices received by U.S. producers of goods and services. Indeed, Richmond Fed President Tom Barkin said it would be smart for the central bank to, quote, “take our time,” saying no one wants to see inflation reemerge. The BLS refers to a variety of sources to calculate CPI, including the prices of goods and services from about 23,000 retail and service establishments throughout the U.S.

What Are Some Criticisms of the CPI?

On the other hand, criticism concerning the quality adjustments used in the CPI has been widely discounted by economists. This notion is also widely attributable to individuals with varying degrees of income. For example, lower-income individuals who contribute more gross income towards necessities of shelter and food will skew differently than households with larger disposable income. For this reason, the CPI may not adequately reflect each individual’s experience about costs and changes over time.

Critiques of CPI Methodology

Pete Rathburn is a copy editor and fact-checker with expertise in economics https://www.forexbox.info/cloud-computing-stocks-the-5-best-cloud-computing/ and personal finance and over twenty years of experience in the classroom.

The CPI also includes substitution bias, which means it can overstate how much the cost of living has changed. For example, if the CPI captures a large increase in the price of an item, it doesn’t take into account people substituting that item for a cheaper one. Not taking this into account wrongly assumes that people continue to buy the more expensive item and experience a higher inflation rate than what they’re actually enduring. The CPI report includes a number of tables that break down how various goods and services increased over the past month, as well as the past 12 months.

CPI-U is the basis of the widely reported CPI numbers that matter to financial markets.The BLS also publishes the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W covers 29% of the U.S. population living in households with income derived predominantly from clerical employment or jobs with an hourly wage. The owners’ equivalent category models the rent equivalent for owner-occupied housing to properly reflect housing costs’ share of consumer spending. User fees and sales or excise taxes are included, while income taxes and the prices of investments such as stocks, bonds, or life insurance policies are not part of the CPI.

Subcategories estimate price changes for everything from tomatoes and salad dressing to auto repairs and sporting events tickets. Price change for each subcategory is provided with and without seasonal adjustment. Some have conjectured that the Fed needs to see another six months of good data. And that, ironically, would put the Fed in the month of June, which is where investors are now pricing in the first rate cut. Though the CPI is widely used as a tool to evaluate the overall health of the economy, it has limitations in what it reports and who it represents. And after a stunningly strong January jobs report, the market’s worries aren’t exactly misplaced.

The cost of commodities such as wheat, corn and soybeans generally have come down amid increased global production. Overall prices rose 3.2% from a year earlier, slightly up from 3.1% in January, according to the Labor Department’s consumer price index. On a monthly basis, costs increased 0.4% following a 0.3% gain the previous month. The CPI Index is an inflation indicator closely watched by policymakers and financial markets. A related CPI measure is used to calculate cost-of-living adjustments for federal benefit payments.

The U.S. Bureau of Labor Statistics (BLS) releases a monthly CPI report that includes statistics about how the prices of different goods and services change over the last month and the last 12-month period. As the traditional CPI-U calculation Tio markets depósito only measures inflation for urban populations, it remains a less-than-reliable source of data for individuals living in rural areas. The CPI does not explicitly state how different demographics may be impacted by inflation.

Since CPI measures the change in consumers’ purchasing power, it is often a key factor in pay negotiations. CPI is an important tool that aims to illustrate the changes in cost of goods and services over time. The official inflation rate is the calculation of changes in the CPI over a period of time. The most recent CPI data was released on March 12, covering the month of February.

Because the CPI Index is so crucial to economic policy and decision-making, its methodology has long been controversial, drawing claims it either understates or overstates inflation. A panel of economists commissioned by Congress to study the issue in 1995 concluded the CPI overstated inflation and was followed by calculation changes to better reflect substitution effects. As a result, the labor market strengthened and returned to pre-pandemic rates by March 2022; however, this stimulus has resulted in the highest CPI calculations in decades. The BLS is committed to providing data promptly and according to established schedules. Automated retrieval programs (commonly called “robots” or “bots”) can cause delays and interfere with other customers’ timely access to information. Therefore, bot activity that doesn’t conform to BLS usage policy is prohibited.

A long-time financial journalist, Dan is a veteran of SmartMoney, MarketWatch, CBS MoneyWatch, InvestorPlace and DailyFinance. As a senior writer at AOL’s DailyFinance, Dan reported market news from the floor of the New York https://www.day-trading.info/dca-stock-meaning-what-is-dollar-cost-averaging/ Stock Exchange and hosted a weekly video segment on equities. The first is used to determine the current cost of the weighted-average basket of products, while the second is used to analyze the year-over-year change.

The next CPI report is giving traders and investors even more agita than usual. Fears are running high that a hot January inflation print will force the Federal Reserve to send interest rates ever higher and keep them there for longer. But Mark Zandi, chief economist of Moody’s Analytics, says Biden’s argument for reelection will strengthen among independent voters if inflation numbers continue to improve in coming months. The index rose 0.4% in February, which is slightly higher than the 0.3% increase in January 2024. A higher CPI often means that a less stringent government policy is generally in place.

Leave a Comment

Your email address will not be published. Required fields are marked *