Title is a double entendre. Anyway, the CPI is bunk. Here’s why:
Because CPI is used as the determinant for both public and private cost-of-living adjustments, it is a highly political statistic. A relatively small percentage increase in CPI can result in very large expenditures for government agencies and corporations alike, which is why there is a great amount of pressure on the BLS to avoid reporting CPI increases regardless of the actual rate of monetary inflation or changes in the prices of goods that consumers actually buy.
The BLS report that makes use of the exclusion technique is known as the “core inflation” figure, which is usually described by the media as “excluding volatile food and energy” prices. I’ve always found this to be rather amusing because, after all, so few consumers buy groceries, heat their homes, or fill their cars with gasoline. Since home prices and indirect taxes are also excluded from the CPI figure, this means that the core inflation concept is designed to eliminate more than 50 percent of household spending from the price index.
The Return of the Great Depression
The proportion is far higher if you have a low income.
Walmart and Costco have consistently been economic barometers of the economy.
When retail sales dip, those two and other discount stores’ sales go up a little. Because of “hedonic” spending, people go buy cheaper products when their money supply declines.
When Walmart and Costco sales dip, check to see if the other retails sales went up, to see if the shoppers returned to their old stores. In this case, I am certain that it means the “hedonic” adjustment in spending has dipped to a new level. Either they decreased buying further, only buying essentials, or the shopper has found an even cheaper alternative to Walmart (Systeme D or the underground economy).
On Live by the consumer, die by the consumer
I like JCclimber’s idea of using WalMart as a barometer. I’d also like to add a time delay to it:
The poor spend money whenever they have it -> White collar middle class prosperity depends on the spending of the poor -> Blue collar middle class prosperity depends on the spending of the white collar middle class … And so on up to the movers and shakers.
This doesn’t rise to the level of an economic observation. That’s just how it seems to work here in America.