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An accurate gauge of inflation?

Alisa Roth Mar 14, 2008
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An accurate gauge of inflation?

Alisa Roth Mar 14, 2008
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Lisa Napoli: Dollar plunging, oil rising. You just can’t deny it anymore. The Wall Street Journal says so, too: We’re in a real, live recession. At least the gaggle of economists the Journal surveys for its forecasts are saying that. The sluggish retail sales figures out Thursday apparently cinched it.

Later this morning, we’ll get more numbers with the release of the Consumer Price Index, a gauge of inflation. Marketplace’s. Alisa Roth says like anything else, the CPI has its critics.


Alisa Roth: Every month, government economists add up the cost of all the things they think we need to live — food, housing, clothes, transportation. That number, crunched a few times, is the Consumer Price Index, or CPI. By comparing it last month’s or last year’s number, they can measure inflation.

Some — like the Federal Reserve — think it’s more accurate to use the Core CPI. That’s the CPI minus things like energy and food, which the Fed takes out because it thinks they’re too volatile.

John Williams is an economist who runs a website called ShadowStats. He thinks that’s absurd.

John Williams: I challenge you to find anyone who does not consume food or energy. It’s not reflective of anyone’s cost of living or anyone’s inflation.

The regular CPI gets criticized, too. Some economists say housing costs aren’t accurately represented, especially in this market.

But most say, flaws and all, the CPI’s about as good an inflation indicator as you can get.

In New York, I’m Alisa Roth for Marketplace.

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