Sunday, July 21, 2013

Is Inflation Truly Low?

Today while I was grocery shopping, I had a startling revelation. The price of milk, of apples, of beer, of a head of lettuce, of just about everything in my cart seemed to be twice the price that it was a just few years ago. I grant you that this is anecdotal and not hard data, but it got me thinking.

I went to the US Government Bureau of Labor Statistics website which lists historical inflation rates as measured by the Consumer Price Index (CPI). So far in 2013, CPI is running at annual rate of 1.8%. CPI was 1.7% in 2012, spiked up to 3.0% in 2011, and was again down at 1.5% in 2010. 2009 was 2.7%, and in 2008 we had a paltry 0.1% inflation. Over the past 5 years, total inflation was 9%. How can this be? Just about everything that I buy on a regular basis is noticeably up more than 9%. Think about it: the price of food, the price of gasoline, my phone bill, my medical insurance, the cost of air travel, my utility bill, everything is up significantly over the past few years. I cannot think of one thing that I purchase on a regular basis that is more economical today than it was in 2008.