This Month Inflation Remain Muted - Officially at 2.32%

More of the Same for Inflation and Deflation Categories


The monthly Consumer Price Index (CPI) Report does not garner many headlines while the inflation rate remains below 3%. This column has written numerous articles regarding Shelter Inflation and Commodity Deflation. Recently we have been seeing Health Insurance Inflation "reported." What are we seeing this February?


The official Rate of Inflation was reported at 0.1% month to month and 2.3% annually. This rate of inflation is identical to what it was during February 2018 and almost identical to the 2.35% of February 2011.We had predominately service and shelter inflation while experiencing commodity deflation. Food was up 1.8% annually, energy was up 2.8%, Shelter was up 3.3%, Hospital related Services were up 4.1% and Medical Care Services were up 5.3%. The deflation was seen in Furniture and Furnishings (-0.2%,)Apparel (-0.9%,) and Education and Communication Commodities (-5.1%)


If last year's basket of goods is used then inflation was 2.57%. There are too many revisions to the weightings of the basket of goods to list them all. Shelter weighting was edged lower, even as we experience greater than 3% Shelter Inflation. The "Health Insurance Inflation" is still abnormally high% of our basket of goods each month. Health Insurance weighting has been climbing for years and supposedly is only 1.18% of our monthly nut.


Inflation remains low as Unemployment remains low. There is a theory that says unemployment can be low while inflation is high and that inflation will be low while unemployment is high (Phillips Curve.) The problem is that the traditional measure of unemployment does not factor in the participation rate. We are near historic lows for unemployment and inflation, looking at the data from 1979 to date.


What does this mean? The things that take up the most of our money, according to CPI, are things that do not change often (Shelter, Health Insurance) or they take up a small amount of our budget (Water, Sewer, Trash.) Inflation is low enough that people are ignoring it. Wages are rising faster than inflation, so all is good. But, worry about he Wuhan Inflation while the rate of infection is roughly 4 cases per million at the time of this article.


It's the Economy.

 Reclaiming Common Sense