Reclaiming Common Sense

The March CPI data was remarkable - Better than Reported

The headline rates were 1.9% annually and 0.4% Monthly

The March 2019 Inflation Report, CPI Report, was released to little fanfare. The headline rate was 0.4% month to month and 1.9% March to March. This does not tell the whole story. This column has produced numerous article that detail how we have had Shelter Inflation, Service Inflation, Medical Inflation, and Commodity Deflation. This month we see more of the same.

We saw simultaneous inflation and deflation. We saw March to march deflation in Energy, Apparel, Medical Care Commodities, Recreation Commodities, and Education and Communication Commodities. We saw month to month deflation in Recreational Commodities, Household operations, and Education and Communication Services.

We saw the largest inflation in Services. The largest annual inflation was recorded in Water and Sewer and Trash Services (3.6%,) Shelter (3.4%,) Household Operation Services (3.4%,) Personal Care Services (3.1%.) The largest spike was in Health Insurance which spiked 9.1% during the past year. Month to month the largest spike was in Energy which spiked 4.4%. Transportation Commodities rose by 0.6%, Medical Care Commodities rose 0.4% and Shelter rose 0.4% month to month.

The Relative Importance of Medical Services rose to 7.000% this month. The CPI data balances a basket of goods every month. The relative importance changes month to month and the same month every year. Here is the data:

You can also see a similar trend for the relative importance of Health Insurance from 2015 (0.756%) to March 2016 (1.000%,) to March 2017 (1.011%,) to March 2018 (1.06%) to March 2019 (1.124%.) One definition of inflation is the same good or service costing more money after one year or month passes. Another definition could be having the same good or service taking a bigger chunk out of your budget.

The Phillips Curve is broken. The Phillips Curve Plots Inflation against Unemployment. The Theory is/was that you can either have low inflation and high unemployment or low unemployment and high inflation. You can also have modest amounts f inflation and unemployment. Right now, we are experiencing low unemployment (officially) and low inflation. The unofficial unemployment rate, the U-7 Effective Unemployment rate that this column has proposed, is closer to 10.00% If this were used then the relationship would "hold."

If you had $4000 a month to spend, you would have spent $4077 based on last year's levels.  First, notice that the government things we have 100.19% of $4000 to spend compared to prior years. last year they thought we had 100.13% of $4000 to spend. Second, $44 of the extra $72 we are spending this March compared to last March is going to Shelter expenses, Rent or the "Rent Equivalent."  Third, you are spending $11 more on Food this march compared to last March. Finally, we are spending almost as much money on Medical Care Services as we are on Energy, $284 versus $306. This obviously varies based upon your actual income.

Inflation exists. We are experiencing Shelter Inflation, Food Inflation, Medical Care Services Inflation, Health Insurance Inflation, and Commodity Deflation.  The good news is that we are experiencing more wage inflation than the headline Consumer Price Inflation.


It's the Economy.