Inflation Deconstructed

This NYTimes illustration of the various components of the CPI (inflation index) is one of the most impressive web graphics I've seen in a while. I suggest you click on the chart to look at the interactive original -- it allows you to zoom in and see the contribution from individual components (gasoline, computers, college tuition, eyeglasses, etc.) to the overall index. Blue regions represent deflation (reduction in prices); reddish regions are strong inflation (the big red blob is gasoline).

One interesting point is that the CPI uses "owner's equivalent rent" to calculate the housing part of the index. This missed the run-up in house prices (rents were pretty flat over the last few years, meaning price to rent ratios were very high, a strong signal of a bubble). Had the cost of ownership, as opposed to renting, been factored in, inflation would have been significantly higher in recent years. Of course, most of that will go away now that the housing bubble has popped :-)

Comments

[bearfund:]

This is really quite amazing. I hardly buy any of the main components. Gasoline? Nope. All the other car-related stuff? Nope. "Owner's equivalent rent?" Nope. No wonder 4% seems absurd to me. This index is meaningless as well as being a deliberate lie.

2008 May 05 11:49 PM

[billddrummer:]

A portion of spending that's omitted from this chart is debt repayment. And how often does the 'average American' buy a TV, car, or take vacation?

2008 May 06 11:31 AM

[sivere:]

Inflation Deconstructed? The Fed Decommissioned:

TakeBackTheFed.com

2008 May 06 12:13 PM