7 ms·
> If milk is $4/gallon today and still $4/gallon 12 mos. from now, that's 0% YoY inflation. Conversely, if there was a one-time jump in a particular item, it w
by throw0101a 4y ago
> If milk is $4/gallon today and still $4/gallon 12 mos. from now, that's 0% YoY inflation.
Conversely, if there was a one-time jump in a particular item, it will take a year before it gets 'removed' from the inflation numbers.
Extremely contrived example: if gas/petrol was $1/L in December 2021 (and generally in all of 2021), but $1.20/L in January 2022, then there will be a 20% YoY jump in inflation for the January number comparing Jan 2021 to Jan 2022.
Now if gas stays at $1.20/L in February 2022, it will still register as 20% YoY even though the price has not changed month-to-month. That 20% (YoY) is "stuck" in the system until January 2023 when we're comparing $1.20/L to $1.20/L.
A one-time jump can 'skew' the numbers if all you look at is YoY metrics.
- soared 4y agoIt’s not really skewing anything though, since the price is 20% yoy?
- danielmarkbruce 4y agoIt is skewing if you are looking for an up to date change. It's like, is it better to get two points on a curved line and draw a straight line through them, or is it better to calculate the derivative and the the slope at a specific point?
- joshuahedlund 4y agoThat depends on how noisy or smooth the changes are. That's why it's valuable to look at both.
- danielmarkbruce 4y agoIt may be - but to the above poster's point - if gas went up 20% in Jan of this year and then stays flat... is it helpful to think of prices as "going up" ? It seems misleading.
- dcow 4y agoIf the last time you looked was last year, then yeah. They went up this year. What’s misleading about reporting yearly percentage increases in prices? I’m baffled.
- ncallaway 4y agoI don’t think anyone was saying it was misleading, rather they were pointing at a nuance of the data.
- unethical_ban 4y agoSigh. The YoY is useful for businessmen and economists. People aren't checking their statements for milk prices from Nov 2021 right now. They just know "man it jumped up". The point is that the everyday person cares about jumps and trends, and hearing "20% YoY increase" for 12 months is misleading to someone not thinking about it in economists' terms. The fact a bunch of people here are debating what it means and how to interpret it proves my point.
- macksd 4y agoAnd yet that's the same kind of distinction that you need to understand to be able to make decisions about household debt. If we're honestly at the point where this is considered too confusing for the masses, I think I've stopped thinking democracy is a good idea.
- cwilby 4y agoThat literally leads to the conclusion that prices rose, in your example.
- rflrob 4y agoThe conclusion that “prices rose” is the correct one. What you should not conclude, even though the inflation has been at 20% all year is that “prices are (still) rising”.
- dcow 4y agoBut they have risen since last year. YoY they are still rising.
- Dylan16807 4y agoYou can't use "rising" to strictly talk about the past. You need to expect it in the future too. If you don't expect the price to be higher a year from now, then it's not "rising YoY", it merely "rose YoY".
- zhte415 4y agoIt isn't, yet it is. The price is still 20% you, and still 0% mom. If reported as inflation still at 20%, does that affect perceptions of inflation, and if so, expectations of inflation? Because expectations of inflation often turn out to be self fulfilling drivers of inflation. Reported as inflation stable even if it is 20%? Better? Not that 0% is a great target, but that's a separate issue.
- JumpCrisscross 4y agoWhich is partly what we’re seeing. CPI rose 0.4% MoM in October, or 4.8% seasonally adjusted. That’s above target, but better than YoY.
- fizx 4y agoReally wish we reported the 4.8% number. Seems more reasonable for a monthly report to focus on the changes of the month.
- Bootvis 4y agoI agree it's confusing. I think they do it to remove seasonality and the experts on the topic probably don't understand anymore why the rest of us think their way of reporting is confusing to lay people.
- orra 4y agoI agree the annualizing the monthly figure would be handy, as an additional figure. Looking at annualized monthly figures, it was also apparent (say) six months ago, that the monthly annual figures would almost certainly continue to get worse.
- treis 4y agoSeasonally adjusted != multiply by 12. Prices naturally fluctuate throughout the year due to weather, consumer patterns, and business cycles. Seasonal adjustment is an attempt to account for those changes.