Decrypting the consumer price index

Marketplace Staff May 9, 2008
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Decrypting the consumer price index

Marketplace Staff May 9, 2008
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Renita Jablonski: When you consider where prices at the pump already are and how much we’re paying for food, it’s going to be hard to make sense out of the next report on inflation from the government. It comes out next week. Chances are April’s figures will seem way too low. Is the government out of touch? Marketplace’s Nancy Marshall Genzer takes a look.


Nancy Marshall Genzer: You just paid, what, about sixty bucks to fill up your gas tank? Maybe more? You’re shell-shocked by egg prices. They’ve risen at least 35 percent. So why do economists expect the overall consumer price index for April to inch up by less than one percent? Global Insight economist Ken Beauchemin says the government uses a market basket of goods to come up with the CPI.

Ken Beauchemin: There’s so many other things in there that aren’t that volatile, and they’re not increasing that rapidly.

The price of women’s clothing is actually down, for example. So is the cost of furniture. But we tend to pay more attention to the prices of things we buy a lot. Adding to the confusion — government inflation hawks give more weight to the so-called core rate of inflation. That excludes the prices of energy and food.

Mark Vitner: You’re telling me that I’m fine if I don’t eat or drive to work?

Wachovia senior economist Mark Vitner says that’s a typical reaction from consumers. But he says the government needs to look at pricing trends for all goods. Otherwise, volatile food and energy prices will have too much influence.

In Washington, I’m Nancy Marshall Genzer for Marketplace.

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