Calculations for the CPI used to be based on a core group of items such as food, energy, services etc. These items were the same year after year so it was a good measure of how the costs changed over time for the same basket of goods.
New CPI uses substitutions, among other things, and assumes that say, if the price of beef is getting to high, people will switch to chicken and pork. They also change around the relative weight of each good again as an attempt to predict consumer response to price changes.
As a result the new variable method of calculating the CPI will, almost always, return a lower % result than the older fixed method. It is of course a total coincidence that this makes the government look better, they are just doing it in an attempt to be more 'accurate.'
If you're interested Investopedia has a good article on the subject.
And that’s just the best they could do after torturing the numbers. True inflation is probably over 20%.
17% by the old method.
What's the old method?
Calculations for the CPI used to be based on a core group of items such as food, energy, services etc. These items were the same year after year so it was a good measure of how the costs changed over time for the same basket of goods.
New CPI uses substitutions, among other things, and assumes that say, if the price of beef is getting to high, people will switch to chicken and pork. They also change around the relative weight of each good again as an attempt to predict consumer response to price changes.
As a result the new variable method of calculating the CPI will, almost always, return a lower % result than the older fixed method. It is of course a total coincidence that this makes the government look better, they are just doing it in an attempt to be more 'accurate.'
If you're interested Investopedia has a good article on the subject.
My grocery bills certainly reflect that.