Consumer costs skyrocket while inflation falls flatBy Patrice Hill
THE WASHINGTON TIMES
http://insider.washingtontimes.com/articles/normal.php?StoryID=20050605-105949-8113r
"Consumer prices are higher this year, but some specialists say even the measured rise in inflation does not reflect the rapidly rising costs consumers encounter every day.
. . . "
"Some economists think the price measure is not reflecting everyday realities. They note a disconnect between the government's inflation reports and what consumers say they are experiencing.
. . ."
"As the debate over inflation rages, another important aspect of the Consumer Price Index has come under fire: a system of "quality adjustments" the department introduced nine years ago to take into account improvements in the performance of products that may justify price increases.
Under the department's new procedures, the shelf price of a computer may be the same this year as last year, for example, but the department's index would show a drop in price if the computer's processing speed or other capabilities have been upgraded.
Thus, according to department computations, computer prices have plunged 70 percent over the past five years and television prices have dived 46 percent -- all largely because of improvements in performance rather than actual drops in their retail prices.
The American Institute for Economic Research -- a Massachusetts Institute of Technology think tank which has been chronicling inflation trends since the 1930s -- contends that inflation has become seriously understated because of the department's quality adjustments.
In an example of a quality adjustment noted by the institute, the sticker price of a new car may go up by $200, but the department records no increase if it was due to $200 worth of air-bag improvements.
. . ."
THE WASHINGTON TIMES
http://insider.washingtontimes.com/articles/normal.php?StoryID=20050605-105949-8113r
"Consumer prices are higher this year, but some specialists say even the measured rise in inflation does not reflect the rapidly rising costs consumers encounter every day.
. . . "
"Some economists think the price measure is not reflecting everyday realities. They note a disconnect between the government's inflation reports and what consumers say they are experiencing.
. . ."
"As the debate over inflation rages, another important aspect of the Consumer Price Index has come under fire: a system of "quality adjustments" the department introduced nine years ago to take into account improvements in the performance of products that may justify price increases.
Under the department's new procedures, the shelf price of a computer may be the same this year as last year, for example, but the department's index would show a drop in price if the computer's processing speed or other capabilities have been upgraded.
Thus, according to department computations, computer prices have plunged 70 percent over the past five years and television prices have dived 46 percent -- all largely because of improvements in performance rather than actual drops in their retail prices.
The American Institute for Economic Research -- a Massachusetts Institute of Technology think tank which has been chronicling inflation trends since the 1930s -- contends that inflation has become seriously understated because of the department's quality adjustments.
In an example of a quality adjustment noted by the institute, the sticker price of a new car may go up by $200, but the department records no increase if it was due to $200 worth of air-bag improvements.
. . ."
