In the last video, we talked a
little bit about what inflation is, and the Consumer
Price Index. And so I thought I would
actually show you data and maybe point out a
few interesting things right over here. So this right over here is
the monthly press release, or it's the table from the
monthly press release, issued by the Bureau of
Labor Statistics. And this is Table
A, which is really a summary of all the
important things. It's the percent changes in
CPI for all urban consumers, the CPI-U. And they do it for
non or urban consumers and all the rest. But the CPI that is
quoted is the one for urban consumers,
the US City Average. And what I always find is
that the details are much more interesting than what
you hear just on the news when people say, oh,
the CPI changed by 0.5%. And one thing I
do want to point-- and this is true of the CPI,
this is true of all government statistics; in fact, this
is true of any report that any company
gives you-- it's very important to keep
in mind whether they're giving a sequential
change or whether they're giving a year-over-year change. So for example, there might be
a press release like this one, and the text of it, or
maybe the headline number when you look at your local
newspaper or your news report, will say, look in June 2011
inflation on all items, on the entire basket of
goods, went down by 0.2%. And you might say, oh wow,
look, there's no inflation. In fact, prices are going down. This would be minor deflation. But it's important to
realize that this is only the seasonally adjusted
prices from May to June. Now, when I talk about
seasonally adjusted-- and traditionally, maybe
people use a different amount of energy, a different amount
of gasoline from May to June. And they try to factor
that in when they compare the basket of good, the
price of the basket of good, from May to June. So that's what they talk
about seasonally adjusting. But if you look over
here, the prices went down for May
to June according to adjusting it for the season. But they year-over-year
changes are still up. If you compare June 2011 to June
2010, it is still up by 3.6%. And in general,
the monthly things are going to be a little
bit more volatile. Obviously, you have the
seasonal adjustments. You have other short-term
factors that might change it. But the year-over-year
one is a stronger signal for what is actually
happening for inflation. Although someone might
want to pay attention to the monthly one, because
that's obviously giving you the most up to date of
what's happening now. And what you'll
often see is, they'll give an inflation
number for everything, and then they'll subtract
out food and energy. So this is all items
less food and energy. And that's because
food and energy, they represent a good
bit of the basket, but they're very, very volatile. You can see it right
here in this report, year-over-year energy has
gone up double digits, 20% for energy generally. If you look at fuel oil,
35.6%, at least on this report. It's been coming
down more recently. But year-over-year it's
been up a huge amount. And so that's actually the main
driving factor for this 3.6%. If you take food and
energy out of the equation, if you compare the basket
of goods minus that, inflation was only up 1.6%. It's interesting. Even within that, you can look
at which parts of the economy, or which products and
services, are getting a lot more expensive and which
ones are getting cheaper. It's actually interesting
that used cars and trucks are up 5.1%. That seems like a pretty strong
price increase for used things.