Inflation Observations

[38Chevy454]

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

 

[Amethyst]

A low official inflation rate, at variance with large observed price rises for the things I buy, has been one of my main ER forum gripes since forever. I'm particularly indignant about the cost of services. It now costs $125 just to have a plumber come to our house, and that's before work begins.

I don't know about antifreeze, but from what I've been reading, the wacky weather worldwide in recent years has hit many nations' agriculture hard, causing food prices to rise everywhere. In addition, the U.S. has been exporting a lot of foodstuffs, placing even more pressure on prices at home.

Amethyst

 

[frank]

it seems to me that when they figure the yearly inflation rate they just seem to forget the items with the most price fluxuation. if gas went up considerably and stayed high it would be excluded from the calculations, but if it went down significantly and stayed low it would be included. pretty much I think the government controls the inflation rate and thus controls increases in social security, va benefits, and short term interest rates to name a few.

 

[John Galt III]

<< 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. >>

+1. I noticed the prices of the things I buy leapt right after the bailout of Wall Street back in the 2007/2008 meltdown. Tuna, bread, antifreeze, motor oil, beer, et al, all way, way up. Motor oil was $1 a quart before, shot up to $2, and now is $3.50 for one quart. What gets me is the pizza shops with the sign in the window advertising a six pack of generic beer for $6.00, as though that is a great price.

 

[ziggy29]

People can and do disagree on the specifics of CPI and its effectiveness at calculating inflation, but almost everyone I know thinks the CPI low-balls the actual inflation people are feeling. They use a number of tricks such as "substitution" to get there. The truth is, the government has a vested interest in reporting a low CPI number, so the fox is guarding the hen house where that goes.

Sure, if you are buying a lot of electronic gizmos and a few other luxury items, inflation has been low. But if you spend your money mostly on food, energy, health care, education and such, there's no way inflation has been in the 2% range for the last few years.

 

[scrabbler1]

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.

 

[ziggy29]

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.

Right, that's another form of "stealth" inflation. Going from 10 ounces to 9 ounces with the same shelf price is basically an 11% price hike they hope you won't notice.

Of course, do that enough times and you foul up recipes. A case in point is jars of pasta sauce, which have gone from 32 to 30 to 28 to 26 to 24 ounces, when most recipes are based on a 32-ounce jar.

 

[Chuckanut]

I just bought some of those new fangled light bulbs with the little diode thing it them. They used to be about $6 each, but I bought them for about $4. Obviously, the inflation rate is now a negative 33%.

 

[ziggy29]

I just bought some of those new fangled light bulbs with the little diode thing it them. They used to be about $6 each, but I bought them for about $4. Obviously, the inflation rate is now a negative 33%.

Yeah, technology is the obvious outlier in terms of inflation. As newer technologies become more mature and mass produced, the prices drop, sometimes dramatically.

The problem is, you can't eat your electronic gizmos.

 

[aja8888]

38Chevy454: Antifreeze (typically ethylene glycol) is a product of ethylene oxide and made in a process chemical plant. Feedstock is typically natural gas in most modern plants. Ethylene derivatives are used in the clothing industry and other and since all this starts from a hydrocarbon base, it is gone up in price along with fuels and oils (oil at $100/barrel, nat gas at @ $4.50 MCF).

I suspect beer prices are up due to high demand, clever sports advertising, and increase in shipping costs.

 

[Chuckanut]

I suspect any toxic material is more expensive these days due to tougher environmental regulations in its production, storage, shipping, use and disposal.

 

[ziggy29]

I suspect any toxic material is more expensive these days due to tougher environmental regulations in its production, storage, shipping, use and disposal.

Indeed. I just noticed that a quart of regular motor oil is about four bucks now. Last I remembered seeing it, you could get it for well under $2. Shows how much attention I've been paying.

 

[aja8888]

Indeed. I just noticed that a quart of regular motor oil is about four bucks now. Last I remembered seeing it, you could get it for well under $2. Shows how much attention I've been paying.

Try pricing some of the synthetics (full) @ $9.00 - $11.00+ per quart. I'm glad my diesel only needs 4 quarts of these every 10,000 miles!

 

[ziggy29]

Try pricing some of the synthetics (full) @ $9.00 - $11.00+ per quart. I'm glad my diesel only needs 4 quarts of these every 10,000 miles!

Yeah, I never really paid much attention, not lately. I only drive about 5-6K miles a year in most years, so I usually just have someone perform a synthetic oil change whenever I take the car in for its annual inspection.

 

[aja8888]

Yeah, I never really paid much attention, not lately. I only drive about 5-6K miles a year in most years, so I usually just have someone perform a synthetic oil change whenever I take the car in for its annual inspection.

The last two years I drove about 30,000 miles per year and do my own oil changes, etc. That has stopped this year (thankfully). DW drives about 10,000 miles per year and her first oil change on her new 2013 SUV was $85 at the dealer. That surprised me.

 

[photoguy]

People can and do disagree on the specifics of CPI and its effectiveness at calculating inflation, but almost everyone I know thinks the CPI low-balls the actual inflation people are feeling.

I think it lowballs the "feeling" of inflation but I don't think it actually understates overall inflation. I think our feelings are driven mainly by food and gas prices which is only a fraction of CPI (13 and 9%).

In food, some of the most recent categories see inflation as 10-20% (e.g. beef is up 11-12%, some fruits as much as 20%). But this is only a part of a part so it doesn't move the aggregate much.

If there's a credible critique of the BLS numbers someone can point me to, I'd be interested in reading it. Is there any significant dispute among economists that the BLS approach is wrong?

 

[brewer12345]

I realize that the gov't official inflation rate does not include energy and food

Absolutely, completely incorrect. If you are going to indulge in a tinfoil-worthy rant over nothing, at least get basic facts straight.

 

[brewer12345]

Is there any significant dispute among economists that the BLS approach is wrong?

Nope. Only the nutballs and politically motivated extremists tilt at this windmill.

 

[MooreBonds]

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.

Absolutely, completely incorrect. If you are going to indulge in a tinfoil-worthy rant over nothing, at least get basic facts straight.

You might see a headline that says "Core CPI", which does exclude food and energy, because energy and food can be quite volatile and doesn't give a good, smooth, long-run view of more controllable inflation...but the official CPI-Urban that is usually used for inflation indexing, it does include food and energy.

The reason they exclude food/energy in Core-CPI is because there's nothing you can do about a drought spiking corn and soybeans by 35%, or a war breaking out in the middle east and spiking oil by 50%, so economists like to see what more 'controllable' inputs are doing price-wise, without the noise of the volatile and fairly uncontrollable food and energy variables.

But as others have said, while the overall CPI may be understated to a certain degree, you feel like CPI is vastly understated mainly because we see the far more frequent food purchases, rather than the once-a-year or every 2 or 4+ years purchases of technological advances in appliances and electronics or automobiles with much larger ticket prices.

Also, when you keep buying the exact same thing (steak, cookies, oil), you see instantly how the price changes, and can see the inflation. However, when you look at your next TV and look at a different sized screen and different resolution from a different manufacturer, or when you're clothes shopping and look at a different brand or style, or look at a different appliance brand, it's not a perfect apples-to-apples comparison, so it's more difficult to instantly see how the price has changed from your last purchase, because it's not the same item.

 

[NanoSour]

Indeed. I just noticed that a quart of regular motor oil is about four bucks now. Last I remembered seeing it, you could get it for well under $2. Shows how much attention I've been paying.

Definitely true about the cost of a quart of oil. However, I remember 20 years ago I religiously changed my oil every 3000 miles. In todays vehicles you can literally go 10,000 miles between oil changes. I know some will think this is crazy, but we have two 9 year old vehicles, each with 80K miles on them. Only change oil every 8-10K miles.

 

[W2R]

Some expenditures, such as cable TV/internet, gasoline, and medical care, seem very hard hit, and over the past decade have increased faster than the overall CPI would suggest. Of course one could argue that we are getting higher value, too, as medical care improves and the average total downloads from the internet skyrocket.

The impact of increasing prices depends on one's individual situation in life. For example: older folks need more medical care than others, on average, so that particular soaring expense is very easily noticed by those of us who are older. The increase in medical expenditures for me has been staggering, and (knock on wood) so far I am healthier than many other 66-year-olds.

On the other hand, I don't happen to drink or smoke, so the rising costs of beer and cigarettes do not impact my budget at all. Reading on my Kindle has been much cheaper for me than buying paperback books was, ten years ago.

All in all, true inflation vs the CPI falls into the category of "Things I can do Nothing About". Worrying about this excessively would decrease my own overall level of joie de vivre. So, I just invest part of my portfolio in equities and try to use whatever income I have from a number of sources to enjoy my retirement as much as possible.

 

[rbmrtn]

Definitely true about the cost of a quart of oil. However, I remember 20 years ago I religiously changed my oil every 3000 miles. In todays vehicles you can literally go 10,000 miles between oil changes. I know some will think this is crazy, but we have two 9 year old vehicles, each with 80K miles on them. Only change oil every 8-10K miles.

Engines and oil specification have changed a lot since 3K mile oil changes and straight weight oil with no additives.

Stop Changing Your Oil! - Edmunds.com

Get a used oil analysis done. It will help determine how your oil/engine are performing with your driving habits. Gas Engine

I do one year intervals on oil changes now.

 

[Chuckanut]

Engines and oil specification have changed a lot since 3K mile oil changes and straight weight oil with no additives.

Stop Changing Your Oil! - Edmunds.com

Get a used oil analysis done. It will help determine how your oil/engine are performing with your driving habits. Gas Engine

I do one year intervals on oil changes now.

Good article. Thanks for posting the link.

My understanding is that most big rig trucks, aircraft, watercraft, etc. do maintenance based upon hours of operation, not mileage. This makes more sense to me. With modern computers I think this could be integrated into most card rather easily.

 

[38Chevy454]

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.

I do agree the gov't has vested interest to keep the official number low and make it seem better. I should have specified the core inflation rate that excludes energy and food, not total rate. Sure technology provides improvements and can offset some. It is the products we buy regularly that have the most impact on my life. So when I fill up with fuel, or buy groceries that is right now. Not down the road when I need a new big screen TV or new washing machine. A lower rate is beneficial to reduce SS and other increases in gov't spending. Like was said, it is fox watching the hen house.

I especially feel the price of motor oil, my motorhome takes 19 quarts per change ( and it is recommended to use synthetic!), my two diesel pickups are 11 or 12 qts each. Add in all of my other vehicles and older hot rods and I should be investing in oil company stocks

Am I suffering, as in not able to do the things I want? Not in the least, but it is costing me more to do the same things.

 

[brewer12345]

I do agree the gov't has vested interest to keep the official number low and make it seem better. I should have specified the core inflation rate that excludes energy and food, not total rate. Sure technology provides improvements and can offset some. It is the products we buy regularly that have the most impact on my life. So when I fill up with fuel, or buy groceries that is right now. Not down the road when I need a new big screen TV or new washing machine. A lower rate is beneficial to reduce SS and other increases in gov't spending. Like was said, it is fox watching the hen house.

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).