Inflation? What inflation?

Today, initial CPI, or Consumer Price Index, data came out for the month of May. In short, this is supposed to measure the amount of general increase in the price level of consumer items.

Mathematically, there are some 40,000 items which are factored into the calculation of the index. Today's data came out at an annualized rate of 7.25%. Historically, inflation has averaged 3%, so 7.25% is a pretty big number. However, certain economists like to "net" out certain items which can regularly scew data. These items are food and energy. Of course, most every American needs to buy items which fall into the food and/or energy category. However, these items tend to be quite volatile and bounce around quite a bit from month to month. In short, it is not politically popular for Americans to see prices increase at 7.5% per year, so it may make sense to remove these items from the commonly quoted data. When you do this, the "core" inflation number comes in at 2.5%; much more palatable.

So as the stock market rejoiced the "core" inflation number, the commodities market was looking at the net number of 7.25%. Take a cursory glance at your expenses. Have they risen? Which number do you think is more accurate?

Hope that clears things up.

B