Is Inflation Coming?

Look at your grocery bill – it's already here!

Headlines from Wednesday, May 4, 2011:
“Services ISM (Institute for Supply Management’s Non-Manufacturing, or Service, survey) Plummets: …Concerns about Fuel and Commodity Costs…”

Headlines from Tuesday, May 10, 2011:
“April Import Price Index was reported up 2.2%, following a revised 2.6% increase in March (previously +2.7%). Notably, the core of the action was in petroleum and food prices...”

The Fed continues to insist that inflation is non-existent. The problem as I see it is that when calculating inflation, the fed does not include food or oil, as these two “costs” are “too volatile” or, said another way “short-term changes in food and oil prices don't predict long-term changes in food and oil prices”. Further compounding the error is the 40% of the CPI* that is accounted for by real estate values.


*CPI (consumer price index) (def):
“The CPI represents changes in prices of all goods and services purchased for consumption by urban households. User fees (such as water and sewer service) and sales and excise taxes paid by the consumer are also included. This index value has been calculated every year since 1913.”


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