HomerJ wrote: ↑Fri Jun 11, 2021 9:46 am
It seems to be mostly caused by airlines, and used cars blip... caused by coming out of a pandemic.
Supply and demand is out of whack right now. Give it time to settle down.
Look at these numbers.
May 2020 to May 2021
All items - 5%
Food away from home - 4%
New vehicles - 3.3%
Rent of Primary residence - 1.8%
Used cars and trucks - 29.7%
Airline fares - 24.1%
Source, Bureau of Labor Statistics, Consumer Price Index
Well, "out of whack" results in higher prices. That also is "inflation". The CPI-U is an agnostic indicator; it knows nothing about the causes of price changes.
There are way to eliminate occasional spikes in prices. Seasonally adjusted CPI is one, but that addresses mostly month-over-month, or few_months-over-few_months changes. If we were to look at airline ticket prices, we would find that every year going from October into November and December, they get "out of whack". Then they get again out of whack (but in the opposite direction, going from December into late January and February.
Of course, it makes no sense to look at seasonally adjusted CPI when comparing December 2020 with December 2019. It is exactly the same season, isn't it ?
When looking farther than one year in the past also the seasonally adjusted indicator loses relevance. Maybe comparing December 2020 to October 2019 there is a seasonal component on top of a 14 months change. That is smaller than the seasonal component on top of a 2-month change when comparing December 2020 to October 2020.
When comparing December 2020 to October 2015 the seasonal effect can usually be neglected.
Besides adjusting for the season, which does not help in the year-over-year analysis, we know that the inflation calculation contains volatile components, namely food and energy. We can exclude those and this is a "physical correction" of the index.
We can operate a "mathematical correction" by looking not at the monrthly year over year change, but at the 3-month average year-over-year change. Or at the 6-months average, or at the 12-month average. all these measures tend to smooth out spikes, but are also less responsive and take longer to detect long-term inflation growth.