Is there an inflation rate that accurately reflects how people actually spend their money?
What I mean is:
I buy bread, butter, eggs, and milk "daily" but a refrigerator only once in 5-6 years.
So I don't really care that much that the refrigerators have seen a price increase of only 2% while the daily groceries are exploding in price but taken together somehow the "funny math" of economists turns it into "a moderate inflation".
Also, if we've gone through 4 years of massive inflation I feel a bit taken the piss out of when I hear things like "inflation isn't as bad as everyone says; this year it's at a moderate 4%" completely ignoring the rocket launch rise of prices over the past 5 years.
And why is shrinkflation seemingly completely ignored? Or isn't it not is?
Can someone with a solid understanding of these things chime in on this? I honestly want to understand it better and move out of my "box of ignorance".
Can someone shine a little light on some inflation related questions I have?
byu/Phrostylicious inAskEconomics
Posted by Phrostylicious
1 Comment
>Is there an inflation rate that accurately reflects how people actually spend their money?
This is very much how the CPI, what people usually refer to as “inflation”, works.
>And why is shrinkflation seemingly completely ignored? Or isn’t it not is?
It’s not. A lot of the typical goods you’d be concerned with, like butter for instance, are measured by weight. Meaning what’s measured is for instance the price of an ounce of butter, *regardless* of what the actual packaging size is.
>I buy bread, butter, eggs, and milk “daily” but a refrigerator only once in 5-6 years.
The way the CPI works is that it is weighted by people’s actual consumption. So if you buy a refrigerator every 5 years, the yearly weight would be 1/5th of a refrigerator.
https://www.bls.gov/cpi/tables/relative-importance/
If you look at the actual weights, you’ll see that housing, transportation and food make up the biggest categories. It should be quite obvious that this matches with what you would expect people’s “real consumption” to be.
https://www.bls.gov/cpi/tables/relative-importance/2025.htm
Generally the idea that CPI data is wrong because cheaper TVs or whatever are treated the same as more expensive food so it “evens out” even if food matters more to people is very much false.