CPI versus Reality

Last updated at 2014-02-06 18:32:23

CPI, Components, Income: Total Per Cent Change since 2000



The Facts


  • Officially, consumer prices have increased at an average of 2.4% per year since 2000.
  • Energy prices have increased 11.4% per year. Gasoline is 146% more expensive now than in 2000.
  • Food prices have increased an average of 6.5% per year meaning the cost of eating today is more than double what it was 13 years ago.
  • Manufactured goods however, thanks almost certainly to globalization’s effect on labor prices, have increased only 2.9% per year.
  • The only thing inflating below the CPI rate are family incomes: the lowest quintile have achieved an average annual income increase of 1.0%. Even the top quintile is slightly lagging CPI at 2.3% per year.

Conclusions


  1. The poor, who spend a much larger fraction of total income on food and energy have experienced an acute increase in their cost of living and therefore almost certainly a decrease in their quality of life.
  2. Wealthy Americans have seen their income growth track official CPI. More importantly, they spend a much smaller fraction of total income on food and energy and a much larger fraction on cloths, cars, toys and electronics. So rapid food and energy inflation has had only a marginal impact on their lives.
  3. Official Inflation numbers do little to communicate the reality of decaying buying power in America, especially for the non-welathy, i.e. most Americans.

The Data


All data from US government sources and The IMF.

Underlying Data (with links back to original sources)