Winter is coming?

Nothing like a good jobs report to get the inflation bugs going, eh? The recovery is dark and full of inflations.

Lets take a look at where we we’ve been and where we are. First, though, none of the BS of “excluding energy and food” or using the deflator for personal consumption expenditures, dammit. Let’s look at the whole hog (clic the pic for a more legible image:

inflation2

 

The blue line is inflation calculated using the good old CPI for all urban consumers, The red is inflation calculated using the price deflator for GDP. Since CPI uses a fixed set of goods (no substitution) it’s a Laspeyres index and tends to overstate inflation. On the other hand, the deflator is a Paasche index (which allows perfect substitution in consumption) and it tends to understate inflation. For the last few quarters, they’ve tracked pretty closely. Note that both indices report that inflation now is lower than it was during much of 2011.

 

One thought on “Winter is coming?

  1. Frankly speaking, it’s no rocket science that no one likes inflation and that’s something we all wish to stay away from, but we got to be very careful with how we deal up with things. I don’t worry all that and with a broker like OctaFX, it’s just ever so easy and straight forward, it’s especially to do with their outstanding daily market news and analysis service, it’s all easy and simple yet is extremely effective and makes trading easy.

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