It’s still as bad as you think, and worse than the headlines imply.
“Inflation eases more than expected in November to 7.1%” – This uplifting Fox News Headline is a facade that most people will not look past. The truth only becomes visible when you understand a little about the Consumer Price Index, or CPI.
What you need to know about the CPI in 30 seconds
The CPI tracks consumer prices, and the government produces monthly reports on how these prices change. The items used to calculate the CPI have changed over the years, and there are many who say that the current choices are (intentionally?) misleading for a variety of reasons. But for this article we will just take it at face value.
The number that makes headlines each month is the price increase over the last 12 months. So, when the fed reports a 7.1% rise in November of 2022, it means that prices are 7.1% higher than they were November 2021. Compare this with the 7.75% reported in October, and especially with the 8.26% from September and it looks like we are heading in the right direction!
Well … not so much.
We actually need to look at the inflation numbers from last year to get the big picture. Remember, the current administration has been running the show for over two years now. Just looking back one year is like only looking at the second person in a relay race. Where your team is now depends a great deal on what happened during the first leg of the race.
Look at this table:
These are raw CPI index numbers from the US Bureau of Labor Statistics. Calculate the change in the index from each month in 2021 to 2022 and you will find this year’s monthly “inflation index.” I have done it for you, below, for this year so far:
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | |
| 7.48% | 7.87% | 8.54% | 8.26% | 8.58% | 9.06% | 8.52% | 8.26% | 8.20% | 7.75% | 7.11% |
Here is where the annual data work out to the benefit of the administration. It looks to the casual observer that inflation is heading down. But what happens when we calculate the increase of the CPI over two years instead of just one? We get a completely different picture:
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | |
| 8.98% | 9.68% | 11.39% | 12.76% | 14.00% | 14.94% | 14.35% | 13.95% | 14.03% | 14.45% | 14.40% |
Not only is it not decreasing, but the two-year inflation rate has averaged 14.35% for the last six months, and the November numbers were above that average. The reason it appears that inflation decreased is that inflation jumped in November of last year. Look at this table, which also appears on the federal government’s BLS website, and shows the annual percentage increase in the CPI:
Look at all of the annual percent changes in CPI (the monthly reported annual inflation rate) and notice that for all the months from 2012 through the end of 2020 the rate averaged just 1.58%. That is astounding, especially considering the average for the past two years is now at 6.43%. And for the past 12 months it clocks in at over 8%.
It is not surprising that the administration would want to dress up the data, but it is very disappointing (and dangerous) that almost all of the major news outlets just reported the number without any intelligent analysis.