Fed Not Concerned On How Inflation Affects You And Me
US producer prices (PPI) in May recorded their biggest increase in more than 2.5 yrs as the cost of gasoline and food rose, suggesting that the Crude Oil-driven Southward push in prices is nearing its end.
Physician care costs rose 0.1% after slipping 0.3% in April. This component feeds into the personal consumption expenditures (PCE) price index, which is the Fed’s favorite inflation gauge.
According to the PCE, there is virtually no inflation in the US economy. The latest Consumer Price Index (CPI) actually shows a 0.2% decline in prices from April 2014.
Do not tell that to millions of renters who have seen their monthly rent checks rise an on average 3.5% over the past year.
For American families shouldering college tuition payments or child care expenses, + 3.7% from last year, will also find the notion of an inflation-free economy hard to believe.
The official US government inflation rate, the number Federal Reserve Chair Janet Yellen is watching closely as she decides when to start raising interest rates, bears little resemblance to that experienced in everyday life, and the way inflation feels to any individual varies widely, based on demographics.
A new tool created by researchers at the Atlanta Federal Reserve Bank lets users estimate their own personal inflation rate.
MyCPI builds a customized inflation rate, based on responses to a handful of questions: age, income, education, marital status, homeownership. The result is based on the CPI and government surveys of consumer spending.
Some of the worst inflation is hitting single women over 55 who rent their homes, make less than $30,000 a year, and are not college-educated. Overall prices have climbed 1.3% from last year. Single men under 35 who own homes, did not go beyond high school, and earn from $30,000 – 70,000 are actually experiencing deflation: Overall prices dropped 1.2% from a year ago.
The variation can be explained by how the different groups spend money.
The Men Vs the Women, here is how they spend their money on common categories, along with how much an average person spends.
Men spends 3X more on transportation than Women, and Women spend 50% more on housing.
These differences matter because the prices of different products can rise or fall at dramatically varying rates.
Transportation costs are down 9.8% from a year ago, driven by the cheaper price of gasoline. That helps almost every American who owns a car, and it particularly helps young families that tend to drive more.
The Atlanta Fed’s tool is useful for letting people know what sort of inflation people like you and me are feeling.
Users can sign up for monthly updates as new CPI data come out, and the Fed plans to add further data and graphics to the tool. But MyCPI is unlikely to capture your experience if you have unique spending habits.
To sign up go here: https://www.frbatlanta.org/research/inflationproject/mycpi.aspx?d=1&s=tw
Have a terrific weekend.
HeffX-LTN
Paul Ebeling
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