Inflation Observations

[Amethyst]

Could the oven cleaner be petroleum-based? (Our ovens are self-cleaning, so I have no bottle labels to check). So many household chemicals seem to be oil-based. With the emphasis on "greener" products, that may change, but it's hard to imagine a really effective oven cleaner that is also "green"!

W2R wisely observes that we can do nothing about inflation except hedge our investments the best we can. Still, something honest and stubborn in me rebels against "not seeing" things - e.g., pretending I don't notice I am paying the same $1.75 for a packet of maybe 12 zinnia seeds, that I paid a few years ago for a packet containing dozens of seeds. Or that ice cream containers not only have less ice cream, but were also deliberately redesigned to be proportional - and thus look similar - to the larger containers.

A.

Lot of good comments. I deliberately did not include oil as example, because we all know how much gas and other energy related items have gone up. My main observation was the oven cleaner really shocked me, nearly doubling in a few years time.

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[Independent]

Besides the price rising on common items, don't forget how companies simply reduce the quantity of the item while keeping the price the same. One item wich has undergone not one but two downsizes in the last 3 years are Keebler cookies. The package used to be around a pound and contained 2 long rows of 15 cookies, or 30 in all. Then they repackaged it (along with all the "new and improved" on the labeling grrrrrrr) to 3 short rows with 9 cookies, or 27 in all. Then they shrunk the package again, reducing the quantity to 3 short rows of 8 cookies, or 24 in all. That's a 17% reduction from the 30 cookies per package only 3 years ago. It now costs over $5 per pound (gotta look for those unit pricing stickers) to buy these cookies, more than chopped meat! Even when they are on "sale" they still cost at least $4 per pound. I have switched to another brand which is not as good but keep an eye on significant sales for any brand.

This frustrates me, too. I recently opened a box of something (crackers?) and it didn't seem full. I dug the old box out of the recycle. Sure enough, the new box was 14oz, the old was 16ox, but the boxes were the same size. Arrgh.

But, note that the BLS watches package sizes, so at least my SS benefit adjusts for this.

To take the most straightforward example of quality adjustment, which the CPI handles automatically, suppose the maker of a 1.5-ounce candy bar selling for 75 cents replaces it by the same brand of candy bar, still selling for 75 cents, but weighing only 1.0 ounce. If the shrunken size is ignored, it looks like the price hasn’t changed. The CPI, however, prices candy and most other food items on a per-ounce basis and would automatically record a 50-percent increase in the quality-adjusted price of the item,

http://www.bls.gov/opub/mlr/2008/08/art1full.pdf

 

[38Chevy454]

You have no clue how these things work, do you?

I spent 5 years as a regulator, working for a semi-gubinmental organization. I worked cheek by jowl with regulators who were employees of the state and federal gubmints. There is enormous turnover in all of these organizations. Do you think all the people who worked in these agencies and then go elsewhere are sworn to silence? Ridiculous. Certain things become fairly common (almost public) knowledge, other things become an open secret among practitioners in a specific field. This is stuff that is supposedly top secret and not subject to discovery in lawsuits, etc. If there were a massive effort on the part of BLS economists and workers to fraudulently reduce reported CPI (insert image of evil gubmint bureaucrat here), do you really think it is even possible that this would not quickly become fairly common knowledge, at least among economists who traffic in this stuff?

If you really think that none of these people talk after they leave their agency, I would like to talk to you about some excellent real estate opportunities in Brooklyn, [-]swampy[/-] sunny Florida, and the Moon (America's next frontier).

No, I do believe that gov't has interest in keeping the inflation rate at a lower level. It is not a secret closed group of people in some closed gov't agency. Gov't does have an ability to hear what it wants, or stated another way, the people reporting do have bias in coming up with the answer that top level administrators want to hear. I will not say the gov't is conspiracy to control everything. Just that as it is getting bigger and has greater interest in keeping the money where it has the best benefit for the gov't itself. Gov't (all levels: fed, state, local) makes the laws that we all have to adhere to. Gov't can also make policy and laws that have benefit to gov't.

It is not my tin foil hat, or me being a conspiracy nut. It is based on my observations. I also work at my job that is paid nearly 100% on gov't funding, so I see how policy and laws can have a drastic effect on the outcome. I have to go to work to do the Top Secret stuff

Back to my original post, I only was making an observation that the price of many items has gone up considerably more than the inflation rate. I was not inferring gov't conspiracy to control prices

I have no desire to buy real estate more than my current house. Did the rental property thing in the past, decided it is not my preference for this point in my life.

 

[38Chevy454]

Could the oven cleaner be petroleum-based? (Our ovens are self-cleaning, so I have no bottle labels to check). So many household chemicals seem to be oil-based. With the emphasis on "greener" products, that may change, but it's hard to imagine a really effective oven cleaner that is also "green"!

W2R wisely observes that we can do nothing about inflation except hedge our investments the best we can. Still, something honest and stubborn in me rebels against "not seeing" things - e.g., pretending I don't notice I am paying the same $1.75 for a packet of maybe 12 zinnia seeds, that I paid a few years ago for a packet containing dozens of seeds. Or that ice cream containers not only have less ice cream, but were also deliberately redesigned to be proportional - and thus look similar - to the larger containers.

A.

Oven cleaner is sodium hydroxide, or the more common name many know it by is lye. To my knowledge this is not a by-product or produced from oil-based raw materials.

The less product, or in smaller packaging is very frustrating, as several have pointed out. I like the term used earlier calling it stealth inflation. You do have to look at the unit cost.

 

[longranger]

Almost anything related to the government immediately puts me in a totally cynical mood. On almost any issue or parameter you can imagine the data is skewed and massaged to create the impressions our politicians want. Why should government generated CPI data be any different?

 

[Animorph]

I've been using a budget based on my 2004 expenses and increased by CPI (the Social Security version) each year, except I skipped the 2009 5.8% adjustment. So roughly 10 years. I've had no problems staying within the budget, and it seems more generous now than it did in 2004.

Even the car oil thing works out fine. Sure the price may have gone up, but I hardly use it any more. The newer cars just don't burn oil like they used to.

 

[brewer12345]

Oven cleaner is sodium hydroxide, or the more common name many know it by is lye. To my knowledge this is not a by-product or produced from oil-based raw materials.

I believe this is produced by a very simple process (take a look at OLN's chlor alkali business, as this is central to their business). The biggest drivers to cost are electricity and transportation, both of which would be tied to oil and other forms of energy.

 

[aja8888]

The less product, or in smaller packaging is very frustrating, as several have pointed out. I like the term used earlier calling it stealth inflation. You do have to look at the unit cost.

You can buy bulk motor oil in 55-gallon drum size (about $2550.00 for Mobil1 synthetic):

Amazon.com: Mobil 1 98E682 5W-30 Synthetic Motor Oil - 55 Gallon Drum: Automotive

Seems like it is no deal, however.

 

[David1961]

I'm amazed at how much some restaurants charge for a glass of soda or lemonade. Their profit margins on soft drinks must be off the charts! That stuff can really add up over time.

 

[youbet]

I'm amazed at how much some restaurants charge for a glass of soda or lemonade. Their profit margins on soft drinks must be off the charts! That stuff can really add up over time.

Most restaurants have relatively low profit margins. We see restaurants come and go around here all the time. They charge what customers will bear and still be customers. There is lots of competition among restaurants and, obviously, if they become too expensive folks just eat at home.

I think it's expensive to rent/own the building, buy and prepare the food and pay the help. Unless I had some gimmick or special differentiating product, the restaurant business isn't one I'd want to be in.

I agree though, if you isolate the price of a glass of soft drink vs the cost, the profit margin is probably quite high.

 

[target2019]

I'm amazed at how much some restaurants charge for a glass of soda or lemonade. Their profit margins on soft drinks must be off the charts! That stuff can really add up over time.

I purchased a Subway sandwich for $5, and skipped the meal deal. The soda and bag of air would have increased my cost by 50%. I think there was not much profit for Subway at this part of the sales process. The server gave me a large wad of napkins, and I was living large courtesy of megacorp.

 

[Walt34]

I'm amazed at how much some restaurants charge for a glass of soda or lemonade. Their profit margins on soft drinks must be off the charts! That stuff can really add up over time.

Last time out we noticed the price of a glass of iced tea was $2.25, and it wasn't even a high-end place. I long ago stopped ordering anything with alcohol in it at restaurants but this makes me want to stick to water.

Eventually they're probably start charging for that. If they do that's just gonna make me mad and I won't go there at all.

And yes I know that the restaurant business is highly competitive but there has to be a reasonable relationship between the prices charged and the value received.

 

[Hamlet]

How long has McDonald's McChicken sandwitch been a dollar?

I've been eating those things at the same price for like 12 years now. They've raised the double cheeseburger to a crazy $1.50, but that McChicken keeps chugging along at a buck.

People think inflation is overstated for the same reason they don't realize how much they actually lose at the casino-- they remember wins and not the losses. Ask anyone gambles a lot without keeping track and you get the same answer "I mostly break even." Memory is not a reliable way to track these things.

If you sit down and actually track everything, you generally find that the various CPI indexes are in the ballpark.

Take gas. People think that gas has been going up like crazy, but it is the same price it was right before the financial crisis. There was a lot of inflation in gas from 2000-2008, but there hasn't been any since. It dropped really low and recovered, for a net increase of about nothing--

Historical Gas Price Charts - GasBuddy.com

While the price of grill cleaner may have recently gone up a lot, it doesn't really impact inflation because it is a completely negligible part of the average person's budget. I've literally never bought it.

Rent is the biggest part of most peoples' budget, and it goes up slow.

 

[ejman]

My very own totally unscientific take on inflation is my overall cost of living for the two of us since ER has been surprisingly level. Once I take our hobbies out of the equation, our annual expenditures have remained remarkably constant, pretty much consistent with a 1-2% annual increase. Sure, individual items go crazy but just as often seem to go crazy in the opposite direction at some other time. I don't know if a substitution effect is taking place or what but when I look at the annual expenditures in Quicken that's what I find. I might add that our standard of living feels about the same throughout.

 

[ziggy29]

Most restaurants have relatively low profit margins. We see restaurants come and go around here all the time. They charge what customers will bear and still be customers. There is lots of competition among restaurants and, obviously, if they become too expensive folks just eat at home.

Clark Howard once noted that the "Bermuda Triangle" of restaurant bills are appetizers, desserts and alcohol, because that's where the profit margin is.

 

[Chuckanut]

Clark Howard once noted that the "Bermuda Triangle" of restaurant bills are appetizers, desserts and alcohol, because that's where the profit margin is.

It's always amazed me that the main course plate may cost $12 and one slice of cake is $7.50.

What really grinds my wheels to a stop is paying 3X the retail price for a bottle of wine. Paying almost $50 for a $15-$20 bottle of wine is outrageous. If I want a bottle of fine wine that is on the expensive side I will bring my own and pay the corking fee. Otherwise, I may order one glass and nurse it through dinner,

 

[MooreBonds]

It's always amazed me that the main course plate may cost $12 and one slice of cake is $7.50.

What really grinds my wheels to a stop is paying 3X the retail price for a bottle of wine. Paying almost $50 for a $15-$20 bottle of wine is outrageous. If I want a bottle of fine wine that is on the expensive side I will bring my own and pay the corking fee. Otherwise, I may order one glass and nurse it through dinner,

Well, when you get down to it - what ISN'T "marked up" 3x (or more!) the retail price at any restaurant? Even that slice of cake could be had at a store for probably $2.50 - which in and of itself is high.

 

[scrabbler1]

My very own totally unscientific take on inflation is my overall cost of living for the two of us since ER has been surprisingly level. Once I take our hobbies out of the equation, our annual expenditures have remained remarkably constant, pretty much consistent with a 1-2% annual increase. Sure, individual items go crazy but just as often seem to go crazy in the opposite direction at some other time. I don't know if a substitution effect is taking place or what but when I look at the annual expenditures in Quicken that's what I find. I might add that our standard of living feels about the same throughout.

Same here. I have found my expenses in the aggregate to be pretty stable in the 5 years I have been ERed. Some rose while others fell from one year to the next. What I have found the most often is that some expenses have risen for reasons which had little if anything to do with inflation. For example, in 2010 I increased the liability limits on my car insurance. That caused a one-time increase in my car insurance bill, nothing to do with inflation. Also in 2010 I had to pay more for my cable TV when they forced everyone to rent a descrambler box every month. Before that, I had an unusually good deal from them so that went away, too, greatly increasing my monthly rate. Neither had anything to do with inflation.

You have to exclude income taxes, too. First, the tax brackets are adjusted for inflation, so modest income growth will not be taxed more. But also in 2010 I had some large (short-term) cap gain distributions which shot up my income tax bill, something which did not repeat in 2011, so the income tax bill went back down. Nothing inflationary about that.

Other expenses may rise by a large percentage very rarely then remain stable for many years. The parking fee I pay to my co-op went up in 1994 when I switched from an outdoor spot to an indoor (garage) spot, not inflationary. That fee did not change until 2005 when it rose about 13%. It has not risen again since.

Other expenses may rise and fall for different reasons. In 2010 (again), we had a very hot summer so my A/C use zoomed upward, pushing my electric bill up. The 3 summers since then have not been as hot so my electric use has dropped slightly along with my bill.

My health insurance premiums have been all over the place, too. First, they rose 20% in 2010 and another 25% in 2011. I then switched to a cheap, bare-bones plan in the middle of 2011, knowing that the ACA had already passed. I knew I would drop that non-ACA-compliant plan at the end of 2013 so my premiums would rise in 2014 (still lower than they were in 2009 before the two huge increases). Some of these increases were inflationary, but changing my plan twice was not.

 

[FUEGO]

I'm not seeing a lot of inflation overall. Sure, items here and there are more expensive.

Beef seems to be $3+/lb for the cheapest cuts or ground, and it wasn't that long ago that $2/lb was a good price. Eggs seems to have gone up along with cheese in the last few years.

We still eat plenty of eggs and cheese, but probably tend to substitute pork and chicken for beef. For a lot of what we cook, pork and chicken are just as good, or better than beef, so it's not a big deal.

Oven cleaner is still $1 at my dollar store, but it may have shrunk over the decades (I've only bought it twice in my lifetime and can't recall ever cleaning my oven).

Food overall doesn't seem to be experiencing massive inflation, notwithstanding a few examples of big price rises. Staples like flour, oil, rice, and milk don't seem to have increased at an exorbitant rate.

Cars, electronics, and appliances are decreasing in price relative to inflation, all the while getting better (with a small asterisk by appliances). In the last year, I've certainly spent plenty on the latter two items, and some maintaining the former item. Well, that's almost a lie because electronics are so cheap and so much better than a decade ago. $210 for the laptop I'm typing this on?

As for restaurants, I seem to recall cheap lunches at Mexican restaurants have been $4-5 for 15+ years. Now some places are a whopping $5-6 for lunch specials. A large pizza with a coupon has been $10 or so for a decade or more. I'm not seeing inflation at restaurants. Unless you consider the expansion of the breadth of restaurants available. When a new restaurant appears with a unique offering, they can name their price absent competition. When the food becomes ubiquitous, market forces act to drive the price down (pizza, Mexican food, Chinese food, for example)

 

[M Paquette]

For what it's worth, the folks at MIT did a thing called the Billion Prices Project, which hoovers up prices from online retailers every day and computes a rate of inflation. They publish charts comparing the price index with the government CPI series data for annual, monthly, and daily samples.

US Daily Index » The Billion Prices Project @ MIT

Overall, they show the same gross trends.

The MIT work has been commercialized at PriceStats ® where one can see the collected data and daily inflation series for many countries.

 

[heeyy_joe]

Helium keeps going up.

 

[audreyh1]

I know there are numerous items that can be tracked. One specific one that stood out for me just recently was oven cleaner. We do a lot of grilling, and I had a real grungy BBQ grill. Decided now that it is warmed up, time to give it a serious cleaning. Being a cheapskate, I used to buy the generic cheap oven cleaner at the dollar store for (you guessed it) $1 within the last 10 years. Well a few years ago it was $1.25. Now it is $2.25 for the same thing Not sure why the significant increase, but my suspicion is a lot due to transportation costs, and not because of absolute raw materials cost increases. Certainly more increase than the rate of inflation would justify.

Also noticed that a 12-pack of beer has gone from around $9 to now $13 range, even on sale prices for regular American lager type beer. If I get a good microbrew type it is even more. Have you priced beef lately? Holy cow (sorry bad pun....) has the cost of beef gone up recently. Seems to be near double what it was just a couple years ago.

Vehicle antifreeze is another, it has increased at far greater rate than inflation. I could continue with more examples, but you get the point.

Now, without getting political I realize that the gov't official inflation rate does not include energy and food, which are two main items that we as consumers are exposed to daily. But why do some items seem to have increased so much more than others? Especially when they are not oil related products.

End result: now it costs me a lot more to drive my vehicle to the store, buy a steak and 12-pack, then cook it up on my now cleaner grill, while drinking a cold beer

Actually, the government inflation rate, the CPI, does include food and energy.

Core CPI is only used for month-to-month variation and pretty much only by the Fed in making policy/rate decisions. Everything else uses the CPI-U or variations that include food and energy. Any time you see a year over year number, it's the CPI. Any time you see something presented in "real" terms, it uses the CPI.

 

[Independent]

I'm amazed at how much some restaurants charge for a glass of soda or lemonade. Their profit margins on soft drinks must be off the charts! That stuff can really add up over time.

Yep. Years ago I switched to tap (not bottled) water in restaurants.

 

[audreyh1]

I go out to eat to enjoy my meal out, so I still enjoy my iced tea with my meal, even though it's outrageously priced.

Of course, my budget easily covers iced tea when eating out.

 

[W2R]

For some reason, I prefer water when eating out.

It amazes me that when I eat at restaurants, I can get what I believe is the healthier drink, and one that quenches my thirst better, for free. Some day, somebody is going to realize this and start charging more for water than for soda or tea at restaurants.