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Inflation was reported yesterday by bls.gov. Deflation pundits applauded, "The core CPI (which excludes food and energy) came in flat and the YoY rate is now down to 0.9% ... " (from David Rosenberg in his "Potluck with Dave" report sent out on May 19th by Gluskin Sheff & Associates Inc.).

I however looked at the YoY rate being up 2.2%. That does not seem like deflation to me. I then checked further and found that "core" CPI is 77.7% of total CPI so this leaves 22.3% of CPI being what consumers spend on food and energy.

I then went back 20 years ago to my elementary algebra class and set up the following equation:

(.777 * .9) + (.223 * X) = 2.2

With the solution being X = 6.7 (approximately)

This means that the inflation measure of food and energy (F&E CPI) was 6.7% YoY in April on an unadjusted basis. This means the results are YoY:

CPI = 2.2%
"core" CPI = .9%
F & E CPI = 6.7%

Food and Energy CPI is the winner of our derby. Which is just about 1/4 of consumer spending.

Disclosure: None

Source: Inflation: CPI vs. Core CPI vs. Food and Energy CPI