More than a meal, a bacon cheeseburger provides food for thought about prices. (Sorry-could not resist.)
Where are we going? To inflation and consumer spending.
The financial firm Convergex has decided that anything composed of beef, cheese and bacon (no bun included) can take us straight to most consumers’ pocketbooks. So, they created the Bacon Cheeseburger Index.
Referring back to 2009, 1998 and 1991-1992, the creators of the index say that it has signaled when the economy would have benefited from more liquidity from the Federal Reserve. The reason? Bacon Cheeseburger prices declined by 3 to 4 percent.
And now again, we have a significant decline. Comparing last year to this year, for June, a 2.9 percent drop, July, 1.2 percent and August, a 2.7 percent fall. Are they saying the economy is slowing?
Below, near the red arrow, you can see the recent decline in price (posted in a September 30, 2015 newsletter from Convergex).
Listening to the Index
Believing we should be able to listen to the economy, a group at Penn State “sonified” the Bacon Cheeseburger Index. In this Foreign Affairs article, you can listen to the Bacon Cheeseburger Index. Their representation of the sonification is below.
Our Bottom Line: Monetary Policy
Consumer price awareness comes from the items we regularly buy. So, although Janet Yellen’s dashboard of inflation indicators includes bond market inflation expectations, the PCE (Personal Consumption Expenditures Price Index) and labor costs, and the CPI says annual inflation is close to .2 percent, perhaps we can also learn from the Bacon Cheeseburger Index.