If you eat a lot of white bread and need only a new sewing machine, then you will barely experience the recent pop in prices.
Otherwise, depending on what you ate and bought, everything might be much more expensive.
Differences in Household Spending
Released on Friday, the 12-month increase (Nov. to Nov.) in the Consumer Price Index was 6.8%. We have not seen such a steep rise since June 1982. But still it mattered what you purchased, what you drive, and where you live.
If your diet was primarily cookies, potatoes, white bread, and rice, and tea and wine, and you drive a hybrid, then your 12-month increase in prices was slight. You just had to stay away from beef and veal (up close to 25%) and gasoline (up 58.1%).
It also mattered where you live. During the 12 months preceding November 2021, prices jumped more in the South (7.2%) and Midwest (7.3%) than the Northeast (6.0%) and West (6.5%). Also, it is probably not fiscally wise to move to Tampa-St. Petersburg-Clearwater, Florida where the 12-month average increase was a whopping 8%.
What you earn also made a difference. Using purchasing data (that excluded gasoline, healthcare and education) from 2004 to 2013, researchers found that households whose income was less than $20,000 had a cumulative inflation rate of 33%. However, for households whose income exceeded $100,000, the total price hike was 25%. They also observed that two-thirds of that disparity came from different prices for the same goods. Meanwhile, the remaining one-third came from different shopping bundles.
Our Bottom Line: The CPI
The Consumer Price Index is an overview and a benchmark. As a yardstick for measuring price changes, the Consumer Price Index tells us an average that gives the big picture of where prices have gone. Also, it is a benchmark we can use to judge a single price increase.
At regular intervals, CPI representatives check actual prices for 211 goods and services in 38 geographic areas. They follow one kind of grapefruit or a gallon of gasoline to see how its price has fluctuated in one place. They look at car prices and apartment rentals. Then, through a formula that takes account of the large and small items, frequent and infrequent purchases, they calculate the change in prices.
While most of us look at what they say for the month and for the past 12 months, we tend not to emphasize the differences in household spending.
Especially by mentioning the Billon Prices Index that uses moment-to-moment online data, though out-of-date, this video displays the deficits of the CPI:
My sources and more: Thanks to economist Louis Johnston whose MinnPost gave me the idea for today’s econlife. Also, you could go to this paper for more detail on household inflation or the BLS site for their data. But, just for some fun, do go to Delta Dental’s tooth fairy survey. At $4.70 a lost tooth, last year, the tooth fairy topped previous highs.
Please note that several of today’s sentences were in a past econlife post and our featured image is from Pixabay.