Commentary
The CNN debate this week between Joe Biden and Donald Trump had a surprising moment, not from the candidates, but from the moderator Jake Tapper. Tapper stated that grocery prices had gone up 20 percent since Biden’s election, a statement that left many viewers in disbelief.
While the Bureau of Labor Statistics and the Federal Reserve confirm this statistic to be 20.8 percent, many people on social media are sharing receipts showing much higher price increases. For example, one man saw a 185 percent increase in his grocery bill over two years, with some items showing a 54 percent increase in just one year.
This discrepancy between official data and real-life experiences is causing confusion and skepticism among the public. Alternative price monitors like the Grocery Price Index and CBS news show slightly higher increases, but still fall short of reflecting people’s actual experiences.
Recent data from the Bureau of Economic Analysis, which follows the Personal Consumption Expenditures measure of inflation, shows a much lower increase in prices compared to other sources. This raises questions about the accuracy of the data and the methods used to track inflation.
Factors such as shrinkflation, substitution of cheaper products, and changes in shopping habits can all contribute to the discrepancy between official data and personal experiences. In an age where prices are easily accessible, it remains puzzling how such disparities can exist.
How on earth can the CPI possibly explain that? It’s just not possible. All valid points, but can they really explain such a huge disparity? Let’s take a look at the PCE data on its own. How exactly is it calculated? According to AI, the BEA uses data from the quarterly GDP report to measure U.S. economic output, but the PCE price index focuses on consumer purchases and uses different calculations. It converts producer prices to the final price paid by consumers and includes a wide range of goods and services compared to other consumer price indexes. The data is based on businesses and trade organizations, unlike the CPI which uses survey data from consumers. The BEA normalizes the data using a price deflator to calculate the monthly PCE index, representing the average monthly inflation rate for the entire U.S. economy.
It’s a complex process, but essentially, the PCE data is derived from the same source as the GDP, which is already skewed due to the inclusion of government spending and debt as factors contributing to overall wealth. While this approach may have been accepted in the 1930s when national income statistics were first introduced, it is now met with skepticism. When trying to capture every aspect of economic activity, as GDP attempts to do, the likelihood of inaccuracies significantly increases.
In essence, if GDP data is unreliable, so is PCE data. The CPI also has its limitations, excluding interest rate increases on various items such as taxes, housing, health insurance, and more. Additionally, it does not account for factors like shrinkflation, quality declines, substitutions, or additional service fees. The question arises whether these discrepancies are intentional obfuscation or simply the result of data limitations. While lower inflation rates may be politically advantageous, they may not accurately reflect the true economic situation.
The current inflationary pressures have surpassed the capabilities of traditional calculation methods, leading to discrepancies between reported data and real-world experiences. Despite these challenges, Wall Street continues to rely on these figures as indicators of the Fed’s actions, influencing stock prices. However, it’s essential to question the relevance of these models in a rapidly changing economic landscape.
As we navigate through these uncertainties, it’s crucial to rely on personal experiences and observations. Reviewing your own expenses and conducting your calculations can provide a clearer understanding of the economic reality. Ultimately, it’s up to individuals to analyze the data and draw their conclusions rather than relying solely on expert opinions.
(Note: This article reflects the author’s opinions and may not align with The Epoch Times’ views) Please rewrite this sentence.
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