8 ms·

"Food Prices Are Soaring Faster Than Inflation and Incomes" ...Food price rises ARE inflation!

by Wolfenstein98k 6y ago

0x008 6y ago
We should say "food prices are soaring faster than the average price of the consumer price index basket."
- Wolfenstein98k 6y ago
  I agree. I may be being pedantic, but I think food prices are (or should be) the first and most important component of what we measure inflation with. It's much clearer to say "the rest of the basket hasn't risen above normal yet, but I am concerned the headline I quoted will mislead people who don't understand inflation.
  - EGreg 6y ago
    You are making a lot of assumptions here. Chief among them is that the price of food must always be strongly tied to the prices of other things in the consumer price index. But clearly, that does not need to be the case. Especially after how unsustainably humans use farmland: https://amp.theguardian.com/environment/2015/dec/02/arable-land-soil-food-security-shortage https://amp.theguardian.com/environment/2015/dec/02/arable-l...
  - KptMarchewa 6y ago
    Why? Food prices are usually few percent (6-18% in the western countries) of total household expenses. If you want to look at something that impacts people way more, look at rent or house prices.
    - dwighttk 6y ago
      Pretty sure (couldn’t read most of the article, paywall) this is talking about worldwide though. (First word of the article is “Global”)
    - sandworm101 6y ago
      >> Food prices are usually few percent (6-18% in the western countries) of total household expenses. Maybe for rich people. If you have an income of 2000/month, with the first 1000 or so going to rent, food is likely your second largest expense.
      - em500 6y ago
        Here are the most recent weights for official US CPI calculations: https://www.bls.gov/cpi/tables/relative-importance/2020.htm https://www.bls.gov/cpi/tables/relative-importance/2020.htm Housing is by far the largest component (42%) (contrary to the common misconception that housing is not in the CPI), followed by Food and Beverages (15%) and Transportation (15%). If you want to up-weight food, you must necessarily down-weight some other component. The prime candidate would be shelter (most other categories are already much smaller than food), but that's of course not the answer that CPI-doubters are looking for.
        sandworm101 6y ago
        But the CPI targets a generic US consumer. I would argue that poor people have a different priority list than the rich. The US economy is increasingly polarized with a widening gap between rich and poor. I am curious as to whether the CPI targets the average person or the average consumer. Rich people spend more. They consumer more and are therefore overrepresented in most consumer-related measurements. Is the CPI meant as a measure of the cost of living or a tool for the calculation of available spending power?
galangalalgol 6y ago
Are they saying that food prices are driving the inflation vs the other factors? Housing is going up fast too isn't it?
- eru 6y ago
  What do you mean by 'driving'? Causally, inflation in the US is driven by the Fed's 2% average inflation target. How those 2% distribute amongst the basket of good is a different question, of course.
- bradleyjg 6y ago
  https://fred.stlouisfed.org/series/CUSR0000SEHC https://fred.stlouisfed.org/series/CUSR0000SEHC https://fred.stlouisfed.org/series/CUUR0000SEHA https://fred.stlouisfed.org/series/CUUR0000SEHA I believe those are the two housing sub components of the basket, with owners’ equivalent rent weighted more than the rent one. Eyeballing it they both look under 2%.
lottin 6y ago
Food price rises are not inflation. Inflation is an increase in the general price level, and specifically it's not an increase in the prices of a selected set of goods.
- Wolfenstein98k 6y ago
  There is no significant inflation measure that does not include food. I agree they're not the entirety of the basket, but they are a core component. There is no "general price level".
  - eru 6y ago
    There is a "general price level", it's just the price level of a sufficiently broad basket.
  - em500 6y ago
    Food and Beverages make up 15% of the US CPI basket. Some other major components are Housing (42%) and Transport (15%). Here's the full list, which make up the "general price level": https://www.bls.gov/cpi/tables/relative-importance/2020.htm https://www.bls.gov/cpi/tables/relative-importance/2020.htm If you believe food is underweighted, then what category do you believe is overweighted?
- sayakura 6y ago
  It is the inflation for the poorest population. What does it matter that 4k tv's are cheaper to people who spend all their money on necessities.
  - lottin 6y ago
    Call it a price rise. But it's not inflation. You don't get to re-define what economic concepts mean.
    - ben_w 6y ago
      Would it not be fair to say that different subpopulations experience different effective inflation rates because they buy different things? Seriously, would it? I’m not an economist. I am aware of RPI/CPI, and inflation is measured independently in different countries within the Eurozone, so it’s not like we can’t have multiple measures for different purposes or populations.
PragmaticPulp 6y ago
From the article: > In the U.S., prices rose close to 3% in the year ending Jan. 2, according to NielsenIQ, roughly double the overall rate of inflation. The study found that food prices are rising faster than inflation. 3% is high, and 1.5% over inflation is also concerning, but I think a lot of people are jumping to conclusions based on the headline. Those inflation numbers would go unnoticed by most during normal times. We’re only seeing these headlines because inflation is a popular media topic right now.
- AuthorizedCust 6y ago
  Do we have a way of seeing periodic media obsessions? Seems like a good AI challenge, although would require a good corpus. I saw another analysis suggesting a 75% drop in media coverage of Biden vs. Trump, at this same point in each’s presidency. That’s a useful statistic that I have a hard time finding in a comprehensive way.
  - sandworm101 6y ago
    >> Do we have a way of seeing periodic media obsessions? We have dozens. Countless companies have tools to show you how things are happening on social media, and all the big new outlets mirror their content to social media. At the most simple level, basic word counts can track how issues appear and disappear. When you hear about a 75% drop in coverage of "Biden v. Trump" that is almost certainly taken from the number of times those two names are included in news reports. Counting words or highlighting the use of new words does not require AI.
    - AuthorizedCust 6y ago
      Topic modeling is a better technique than simple word counts. Topic modeling can use ML.
- evrydayhustling 6y ago
  Disagree that this is alarmism. The question is whether the way inflation is being measured matches the way we use it to make decisions. Graphs like AEI's Chart of the Century [1] have been highlighting for years that inflation numbers are inappropriately averaging decreasing costs for discretionary purchases, while costs for essentials like healthcare and education grow out of control. When food also starts outpacing the average (historically it has paralleled wages in the USA), you really have to ask what inflation is measuring. Low inflation is essential to justifying the monetary easing policies that have been sustaining the stock market through the pandemic... so it is important for everyone to keep an eye on how dialog changes around these numbers. [1] https://www.aei.org/carpe-diem/chart-of-the-day-or-century-3/ https://www.aei.org/carpe-diem/chart-of-the-day-or-century-3...
kjrose 6y ago
"Food prices are not properly accounted for in inflation measures" There, fixed the headline.
- EGreg 6y ago
  No, one component of “inflation” (defined as the rise in the consumer price index) rises much faster than the others.
  - makomk 6y ago
    It's entirely possible that all the things in the consumer price index and other measures of inflation rise overall faster than the headline inflation measures - they do some weird things with weighting and so-called hedonistic adjustments which means that it's probably literally impossible for someone to experience inflation that low. For example, they compensate for the supposed increase in values from, say, flash drives increasing in size, computers in speed, and TVs in size in a way that doesn't make sense if you can't even save money by buying a smaller flash drive or slower computer, or you need a faster PC to do the same things, or if the 32 inch TVs have the same resolution, sound and picture quality as a 24 inch of yesteryear and you have to go up to 40-50 inches to get something actually equivalent in quality to a 32 inch TV from years ago. For a while, one of the key US inflation measures even assumed that if people's medication went up in price massively they'd substitute it for whatever medicine hadn't exploded in price even if it was for some completely different condition! And I'm not convinced that, even for things which genuinely are substitutable like different kinds of food, it's actually possible over the long term to substitute your spending in a way that matches up with official inflation figures.
swiley 6y ago
I've been saying this about housing for a while.
deleted 6y ago
[deleted]
danvoell 6y ago
Thanks for posting, that was my question when I saw the headline.
eru 6y ago
Food is just one part of the basket.
ErikAugust 6y ago
So what gives? Does anyone have the data sets and the formulas used to calculate the CPI? No, I don't think so, because they are hidden. Until the data used to calculate the CPI is open, it is all speculation.
- ed25519FUUU 6y ago
  That’s a good point. The CPI has a huge impact on policy and really just about every financial thing in our lives. It’s kind of insane that we don’t have good visibility and oversight into it!
- fennecfoxen 6y ago
  https://download.bls.gov/pub/time.series/ https://download.bls.gov/pub/time.series/ Be sure to refer to overview.txt and for more high-level details refer to https://www.bls.gov/cpi/data.htm https://www.bls.gov/cpi/data.htm and https://www.bls.gov/cpi/methods-overview.htm https://www.bls.gov/cpi/methods-overview.htm — you might also find relevant information on weighting here https://www.bls.gov/cpi/tables/relative-importance/home.htm https://www.bls.gov/cpi/tables/relative-importance/home.htm Typical entries in the AP (Average Price) series look like: APU0000701322 2015 M05 1.335 where APU0000701322 is a pound of spaghetti or macaroni, and M05 is May. I thought of telling you off for spreading misinformation to incite, but I figured that saying it this would gets my point across more strongly.
  - edoceo 6y ago
    You made the right choice and those links were helpful.
  - ErikAugust 6y ago
    An "Average Price" has to be calculated from survey data. That survey data is what is not open as far as I know: https://www.bls.gov/opub/hom/cpi/data.htm https://www.bls.gov/opub/hom/cpi/data.htm.
lmohseni 6y ago
I have a pretty imperfect understanding of inflation, but wouldn’t increased food and energy prices mean that a consumer will have less money to spend on discretionary purchases? Ie, aren’t food price rises DEflationary?
- chordalkeyboard 6y ago
  No, inflation is the increase in the money supply resulting in each unit of currency having less real value.

"Food Prices Are Soaring Faster Than Inflation and Incomes" ...Food price rises ARE inflation!

0x008 6y ago

We should say "food prices are soaring faster than the average price of the consumer price index basket."

Wolfenstein98k 6y ago
I agree. I may be being pedantic, but I think food prices are (or should be) the first and most important component of what we measure inflation with. It's much clearer to say "the rest of the basket hasn't risen above normal yet, but I am concerned the headline I quoted will mislead people who don't understand inflation.
- EGreg 6y ago
  You are making a lot of assumptions here. Chief among them is that the price of food must always be strongly tied to the prices of other things in the consumer price index. But clearly, that does not need to be the case. Especially after how unsustainably humans use farmland: https://amp.theguardian.com/environment/2015/dec/02/arable-land-soil-food-security-shortage https://amp.theguardian.com/environment/2015/dec/02/arable-l...
- KptMarchewa 6y ago
  Why? Food prices are usually few percent (6-18% in the western countries) of total household expenses. If you want to look at something that impacts people way more, look at rent or house prices.
  - dwighttk 6y ago
    Pretty sure (couldn’t read most of the article, paywall) this is talking about worldwide though. (First word of the article is “Global”)
  - sandworm101 6y ago
    >> Food prices are usually few percent (6-18% in the western countries) of total household expenses. Maybe for rich people. If you have an income of 2000/month, with the first 1000 or so going to rent, food is likely your second largest expense.
    - em500 6y ago
      Here are the most recent weights for official US CPI calculations: https://www.bls.gov/cpi/tables/relative-importance/2020.htm https://www.bls.gov/cpi/tables/relative-importance/2020.htm Housing is by far the largest component (42%) (contrary to the common misconception that housing is not in the CPI), followed by Food and Beverages (15%) and Transportation (15%). If you want to up-weight food, you must necessarily down-weight some other component. The prime candidate would be shelter (most other categories are already much smaller than food), but that's of course not the answer that CPI-doubters are looking for.
      - sandworm101 6y ago
        But the CPI targets a generic US consumer. I would argue that poor people have a different priority list than the rich. The US economy is increasingly polarized with a widening gap between rich and poor. I am curious as to whether the CPI targets the average person or the average consumer. Rich people spend more. They consumer more and are therefore overrepresented in most consumer-related measurements. Is the CPI meant as a measure of the cost of living or a tool for the calculation of available spending power?

galangalalgol 6y ago

Are they saying that food prices are driving the inflation vs the other factors? Housing is going up fast too isn't it?

eru 6y ago
What do you mean by 'driving'? Causally, inflation in the US is driven by the Fed's 2% average inflation target. How those 2% distribute amongst the basket of good is a different question, of course.
bradleyjg 6y ago
https://fred.stlouisfed.org/series/CUSR0000SEHC https://fred.stlouisfed.org/series/CUSR0000SEHC https://fred.stlouisfed.org/series/CUUR0000SEHA https://fred.stlouisfed.org/series/CUUR0000SEHA I believe those are the two housing sub components of the basket, with owners’ equivalent rent weighted more than the rent one. Eyeballing it they both look under 2%.

lottin 6y ago

Food price rises are not inflation. Inflation is an increase in the general price level, and specifically it's not an increase in the prices of a selected set of goods.

Wolfenstein98k 6y ago
There is no significant inflation measure that does not include food. I agree they're not the entirety of the basket, but they are a core component. There is no "general price level".
- eru 6y ago
  There is a "general price level", it's just the price level of a sufficiently broad basket.
- em500 6y ago
  Food and Beverages make up 15% of the US CPI basket. Some other major components are Housing (42%) and Transport (15%). Here's the full list, which make up the "general price level": https://www.bls.gov/cpi/tables/relative-importance/2020.htm https://www.bls.gov/cpi/tables/relative-importance/2020.htm If you believe food is underweighted, then what category do you believe is overweighted?
sayakura 6y ago
It is the inflation for the poorest population. What does it matter that 4k tv's are cheaper to people who spend all their money on necessities.
- lottin 6y ago
  Call it a price rise. But it's not inflation. You don't get to re-define what economic concepts mean.
  - ben_w 6y ago
    Would it not be fair to say that different subpopulations experience different effective inflation rates because they buy different things? Seriously, would it? I’m not an economist. I am aware of RPI/CPI, and inflation is measured independently in different countries within the Eurozone, so it’s not like we can’t have multiple measures for different purposes or populations.

PragmaticPulp 6y ago

From the article: > In the U.S., prices rose close to 3% in the year ending Jan. 2, according to NielsenIQ, roughly double the overall rate of inflation. The study found that food prices are rising faster than inflation. 3% is high, and 1.5% over inflation is also concerning, but I think a lot of people are jumping to conclusions based on the headline. Those inflation numbers would go unnoticed by most during normal times. We’re only seeing these headlines because inflation is a popular media topic right now.

AuthorizedCust 6y ago
Do we have a way of seeing periodic media obsessions? Seems like a good AI challenge, although would require a good corpus. I saw another analysis suggesting a 75% drop in media coverage of Biden vs. Trump, at this same point in each’s presidency. That’s a useful statistic that I have a hard time finding in a comprehensive way.
- sandworm101 6y ago
  >> Do we have a way of seeing periodic media obsessions? We have dozens. Countless companies have tools to show you how things are happening on social media, and all the big new outlets mirror their content to social media. At the most simple level, basic word counts can track how issues appear and disappear. When you hear about a 75% drop in coverage of "Biden v. Trump" that is almost certainly taken from the number of times those two names are included in news reports. Counting words or highlighting the use of new words does not require AI.
  - AuthorizedCust 6y ago
    Topic modeling is a better technique than simple word counts. Topic modeling can use ML.
evrydayhustling 6y ago
Disagree that this is alarmism. The question is whether the way inflation is being measured matches the way we use it to make decisions. Graphs like AEI's Chart of the Century [1] have been highlighting for years that inflation numbers are inappropriately averaging decreasing costs for discretionary purchases, while costs for essentials like healthcare and education grow out of control. When food also starts outpacing the average (historically it has paralleled wages in the USA), you really have to ask what inflation is measuring. Low inflation is essential to justifying the monetary easing policies that have been sustaining the stock market through the pandemic... so it is important for everyone to keep an eye on how dialog changes around these numbers. [1] https://www.aei.org/carpe-diem/chart-of-the-day-or-century-3/ https://www.aei.org/carpe-diem/chart-of-the-day-or-century-3...

kjrose 6y ago

"Food prices are not properly accounted for in inflation measures" There, fixed the headline.

EGreg 6y ago
No, one component of “inflation” (defined as the rise in the consumer price index) rises much faster than the others.
- makomk 6y ago
  It's entirely possible that all the things in the consumer price index and other measures of inflation rise overall faster than the headline inflation measures - they do some weird things with weighting and so-called hedonistic adjustments which means that it's probably literally impossible for someone to experience inflation that low. For example, they compensate for the supposed increase in values from, say, flash drives increasing in size, computers in speed, and TVs in size in a way that doesn't make sense if you can't even save money by buying a smaller flash drive or slower computer, or you need a faster PC to do the same things, or if the 32 inch TVs have the same resolution, sound and picture quality as a 24 inch of yesteryear and you have to go up to 40-50 inches to get something actually equivalent in quality to a 32 inch TV from years ago. For a while, one of the key US inflation measures even assumed that if people's medication went up in price massively they'd substitute it for whatever medicine hadn't exploded in price even if it was for some completely different condition! And I'm not convinced that, even for things which genuinely are substitutable like different kinds of food, it's actually possible over the long term to substitute your spending in a way that matches up with official inflation figures.

swiley 6y ago

I've been saying this about housing for a while.

deleted 6y ago

[deleted]

danvoell 6y ago

Thanks for posting, that was my question when I saw the headline.

eru 6y ago

Food is just one part of the basket.

ErikAugust 6y ago

So what gives? Does anyone have the data sets and the formulas used to calculate the CPI? No, I don't think so, because they are hidden. Until the data used to calculate the CPI is open, it is all speculation.

ed25519FUUU 6y ago
That’s a good point. The CPI has a huge impact on policy and really just about every financial thing in our lives. It’s kind of insane that we don’t have good visibility and oversight into it!
fennecfoxen 6y ago
https://download.bls.gov/pub/time.series/ https://download.bls.gov/pub/time.series/ Be sure to refer to overview.txt and for more high-level details refer to https://www.bls.gov/cpi/data.htm https://www.bls.gov/cpi/data.htm and https://www.bls.gov/cpi/methods-overview.htm https://www.bls.gov/cpi/methods-overview.htm — you might also find relevant information on weighting here https://www.bls.gov/cpi/tables/relative-importance/home.htm https://www.bls.gov/cpi/tables/relative-importance/home.htm Typical entries in the AP (Average Price) series look like: APU0000701322 2015 M05 1.335 where APU0000701322 is a pound of spaghetti or macaroni, and M05 is May. I thought of telling you off for spreading misinformation to incite, but I figured that saying it this would gets my point across more strongly.
- edoceo 6y ago
  You made the right choice and those links were helpful.
- ErikAugust 6y ago
  An "Average Price" has to be calculated from survey data. That survey data is what is not open as far as I know: https://www.bls.gov/opub/hom/cpi/data.htm https://www.bls.gov/opub/hom/cpi/data.htm.

lmohseni 6y ago

I have a pretty imperfect understanding of inflation, but wouldn’t increased food and energy prices mean that a consumer will have less money to spend on discretionary purchases? Ie, aren’t food price rises DEflationary?

chordalkeyboard 6y ago
No, inflation is the increase in the money supply resulting in each unit of currency having less real value.