November 18, 2003

Good News on Inflation

Good news on inflation--since we're no longer worried about deflation, that is:

Consumer prices flat in October - Nov. 18, 2003: ...The Labor Department reported that the consumer price index (CPI), a broad measure of prices paid by consumers, was flat in October after rising 0.3 percent in September. Economists, on average, expected CPI to rise 0.1 percent, according to Briefing.com.

Excluding volatile food and energy prices, the so-called "core" CPI, rose 0.2 percent, after rising 0.1 percent in September. Economists expected core CPI to rise 0.1 percent, according to Briefing.com.

U.S. stock market futures had little reaction to the report, pointing to a positive opening on Wall Street. Treasury bond prices rose. The report seemed unlikely to change the Federal Reserve's view that inflation is a distant threat to the economy, and it could support fears of a continued slowdown in consumer inflation...

Posted by DeLong at November 18, 2003 07:18 AM | TrackBack

Comments

Is that the royal "we" who is no longer worried about deflation, or does it include the whole club (Krugman, ...)? Since when? (And for how long?)

Posted by: Andrew Boucher on November 18, 2003 08:14 AM

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Is that the royal "we" who is no longer worried about deflation, or does it include the whole club (Krugman, ...)? Since when? (And for how long?)

Posted by: Andrew Boucher on November 18, 2003 08:19 AM

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Andrew:

I think it is royal facetiousness :)

Posted by: boonie on November 18, 2003 09:01 AM

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Given the increase in my health insurance copayments this year, I have to think that the health care industry alone will be able to prevent any deflation.

Posted by: Amused Reader on November 18, 2003 06:05 PM

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CPI is a meaningful measure of inflation for every one of us who has no need of food, clothing, shelter, or medical attention.

Someone ought to do a living diorama of what life looks like when all you buy is CPI-measured goods.

Posted by: William in Beijing on November 19, 2003 02:12 AM

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And to which Bush policies do you attribute this result?

Posted by: Jim Miller on November 19, 2003 06:00 AM

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Is the CPI a good measure of the cost of living?

“The CPI is correct in measuring consumer prices. But it's not correct in measuring the cost of living.”

Tony Creszenzi, Miller Tabak

"The things that make up the bulk of consumer expenditures for most U.S. households -- all of them seem to be moving up significantly,"

Carlos Asilis, portfolio manager with the hedge fund Vega Asset Management.

So what's keeping the reading on inflation low? Asilis thinks one big piece of the picture is housing. In computing the CPI, the Bureau of Labor Statistics assigns a 22.2 percent weighting -- the most of any item -- to something called "owners' equivalent rent of primary residence." Basically, it's an estimate of what homeowners might pay in rent if they rented their homes instead of owning them.

You can catch the circularity here. Because the inflation reading is low, rates are low, which has upped home ownership, which has pressured rents, which has put a cap on "owners' equivalent rent," which has helped keep the inflation reading low. Etc.

==Above from:

http://money.cnn.com/2003/11/14/markets/inflation/index.htm

Posted by: Kosh on November 19, 2003 07:24 AM

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People are exponentially funnier when they're in rant mode.

Posted by: LaPierre George on December 10, 2003 10:16 PM

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Nothing's far when one wants to get there.

Posted by: Cater Rebecca on January 10, 2004 02:54 AM

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