why are the costs of food and energy excluded from the inflation rate

Damocles said:
Again, they are part of the original equation.

When the trucker pays for gas it adds to the cost of the item you purchase.

Adding it in again gives it more value than it has.

5+2 = 7, not 7 and remember the two...
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What about when I drive to the grocery store or matt drives to work? That is part of EVERY DAY LIVING and NOT included in the sales price of goods but in the every day budget of the citizen....? Gasoline is goods purchased imo

care
 
How is it that the oil and gas companies get to "count" when evaluating the gdp of our country or how the stock market is performing overall but not count when it comes to what we individually spend on purchasing gas and oil?
 
AssHatZombie said:
SO you agree with "factoring it in twice".



SO now you've changed your mind? You're all over the map. What's up with you?
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No, I don't. This is deliberate obtuseness, seriously. If you read my posts in this thread and get "I want to factor it twice" then you are deliberately misunderstanding because you want to pretend so bad that it doesn't matter what something means.
 
Care4all said:
How is it that the oil and gas companies get to "count" when evaluating the gdp of our country or how the stock market is performing overall but not count when it comes to what we individually spend on purchasing gas and oil?
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SO they can obscure the truth about how americans are doing.
 
And food? why would food not be included in inflation? what makes food different than any other goods?

the 2+ 5 = 7 does not include all the figures in the FIRST place?
 
Care4all said:
What about when I drive to the grocery store or matt drives to work? That is part of EVERY DAY LIVING and NOT included in the sales price of goods but in the every day budget of the citizen....? Gasoline is goods purchased imo

care
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Read the whole thread, care. We've gone over this already, he and I.
 
Care4all said:
And food? why would food not be included in inflation? what makes food different than any other goods?

the 2+ 5 = 7 does not include all the figures in the FIRST place?
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They are included in the Core value.

You are wishing that both Inflation factors be the same figure. And again, did not read the whole of the thread. Read it before commenting because there is a lot of conversation in the middle that we don't need to repeat.
 
Damocles said:
No, I don't. This is deliberate obtuseness, seriously. If you read my posts in this thread and get "I want to factor it twice" then you are deliberately misunderstanding because you want to pretend so bad that it doesn't matter what something means.
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But seriously, you made a suggestion which was in basic agreement. Now you just can't stand agreeing with me. Don't let hate guide your intellect, luke.

Your're purposefully... when you know I... but you don't... and you know you don't.... when you do... when you know I do..... deliberate obtuseness.... disingenuous rubbish!
 
AssHatZombie said:
But seriously, you made a suggestion which was in basic agreement. Now you just can't stand agreeing with me. Don't let hate guide your intellect, luke.

Your're purposefully... when you know I... but you don't... and you know you don't.... when you do... when you know I do..... deliberate obtuseness.... disingenuous rubbish!
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I said, we could factor this in accurately if we made these considerations. Then you proceeded to say we shouldn't consider anything but what you wanted. It has nothing to do with agreement, and everything to do with accuracy. I am an engineer for a reason, it fits well with my need for accuracy.

You are being quite deliberately obtuse.
 
DonQuixote said:
i have wondered about this one and with us facing spiraling inflation and possible stagflation begun to wonder more and more

it seems that i am becoming a prophet of doom or at least near future bad times

this does not please me as i am already taking anti-depressents

maybe we will get a change in administration soon enough to prevent the coming bad times from getting too bad, but i fear that this will not be

does anyone out there see a ray of sunshine or at least a silver lining

we may want change, but is change feasible or even possible given the inertia of our system

anybody but mccain or nader
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Core inflation shows us what HAS happened. Including energy and food will give you an indication of what direction prices may be heading. But as mentioned by others, they are volatile and can therefore swing violently from month to month.

Bottom line though, if you want to be really concerned about what the government is NOT telling us.... M3 money supply. Greenspan nixed reporting on M3 money and Bernanke thus far has not reversed that decision. You want to see a guage for future inflation.... get the M3 numbers.

You are correct that they should be reporting the numbers together. Give us core and give us total in the same breath. Those who understand the numbers will know what they mean. Those that don't, probably won't give a shit.
 
oh, I got it! Things that WE MUST BUY in order to live and make a living like food and gasoline and oil are not counted...only the things that we don't have to have to live are counted!!!

makes alot of sense to me!!! NOT lol
 
It does make perfect sense why they do it the way they do.

It still makes for what we are living in Shrinkflation.

A shrinking economy(not just stagnant) and rising prices.
 
Damocles said:
I said, we could factor this in accurately if we made these considerations. Then you proceeded to say we shouldn't consider anything but what you wanted. It has nothing to do with agreement, and everything to do with accuracy. I am an engineer for a reason, it fits well with my need for accuracy.

You are being quite deliberately obtuse.
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I think your proposal was pretty good. I never insisted on "only what I wanted". SHow me where, if I did.

You did make a suggestion and then flip flop though.
 
AssHatZombie said:
I think your proposal was pretty good. I never insisted on "only what I wanted". SHow me where, if I did.

You did make a suggestion and then flip flop though.
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You said repeatedly that we should factor it as both a cost for the item then again later. This ignores accuracy and increases the values you wish to increase and promises greater "scare factor" for the chicken little argument. (While sometimes the sky might actually be falling, I prefer the numbers to reflect what is actually happening rather than inflate them inaccurately for effect).

If it wouldn't be any more accurate it is worthless to me. Seriously, if there are more people like you, I prefer we leave it the way it is and report both numbers at the same time, it gives an accurate picture without the need to change anything.

The problem is in the reporting, everybody wants to use the number they think supports their ideation best without regard to accuracy.
 
Dungheap said:
The answer, my friend, is upthread. Food and energy are excluded from the core rate but not the headline rate. They are excluded from the core rate because they are highly volatile and subject to big swings that may not be truly reflective of across the board inflation but rather issues specific to the food and energy markets. The headline rate factors in both food and energy.


Here:

http://www.usatoday.com/money/economy/inflation/2007-06-13-inflation-usat_N.htm
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Actually Dung, this is what your article says....that with consistant rises in oil and food, THEY SHOULD BE INCLUDED in the core rate of inflation...

Just as I was voicing above and others have too...

Food, energy costs' exclusion debated
By Barbara Hagenbaugh, USA TODAY
WASHINGTON — When it comes to measuring inflation, consumers and economists often don't speak the same language.

When consumers think of inflation, they often focus on prices of things they buy regularly, such as food and gasoline, which have been going up significantly in price this year.


LATEST REPORT: Energy pushes wholesale inflation up
But when economists, including Federal Reserve officials, talk about inflation, they often focus on a measurement of price pressures called "core" inflation. Core inflation excludes costs of food and energy goods, the very items that are the most visible prices for most consumers. Many economists will be focusing on the core when the government releases its monthly producer price index today and the closely watched consumer price index Friday.

The theory is that food and energy prices historically have been subject to wild swings. Therefore, to get a better gauge of the underlying trend, you should cut those items out.

Food and energy going up

But that theory has been tested lately as food and energy prices have gained steadily in recent months. Some economists are now questioning the rationale for excluding food and energy, arguing that ignoring the two categories could be understating the inflationary threat.

"The core measures are great guides to look at the trend of inflation," says Richard Yamarone, director of economic research at Argus Research. "However, when food and energy prices are … on a consistent increase, you have to look at measures that contain them, because they are having an influence on the overall pace of inflation."

The issue is an important one. Fed Chairman Ben Bernanke and his colleagues are keeping a close eye on inflation, arguing that price pressures continue to be a threat to the economy. Inflationary concerns continued to build Wednesday after the Labor Department said prices of imported goods rose 0.9% in May, the fourth-consecutive gain.

Although they make interest rate policy with an eye to the future, if Fed officials misjudge the inflation trend, they could make mistakes, causing problems economywide.

"We're all trying to get the answer right," Dallas Fed President Richard Fisher says.

Fisher said in a phone interview Tuesday that he and his fellow Fed officials look at a wide range of inflation data. That said, U.S. central bankers focus on one measurement produced by the Commerce Department based on consumer spending, excluding food and energy. In its semiannual report to Congress, the Fed forecasts inflation using the core measure.

Looking at core numbers makes sense, argues Stephen Cecchetti, a finance professor at Brandeis University and a respected inflation expert.

"Over three to six months, you are going to get a lot of noise" in the inflation gauges, he says. "You wouldn't want monetary policymakers to respond to short-term changes in gasoline prices."

Looking for better measures

But some economists say automatically excluding food and energy isn't the best way to erase the noise.

Economists at the Federal Reserve banks in Dallas and Cleveland, for example, have come up with alternative, core inflation gauges. Those measurements suggest inflation is worse than the more traditional gauges, including the Fed's preferred measure, indicate.

The gauges are similar to the core measurements in that they exclude some items. But rather than automatically excluding food and energy, each month the economists drop the items that swing widely in price, positive or negative. Dallas Fed senior economist Jim Dolmas likens it to the judging in a skating competition — the high and low scores are tossed out, and the remaining scores are averaged.

While under that system some food and energy costs are often excluded, items such as airline tickets, televisions, clothing and other goods that tend to fluctuate in price are also frequently tossed out. One category that is rarely excluded is restaurant meals, which analysts at the Dallas and Cleveland Fed banks say have proved to be a good inflation gauge. As a component in the "food" set, restaurant meals are always excluded from traditional core gauges.

Such alternative measurements are attracting interest from economists.

In a survey conducted by USA TODAY April 20-25, nearly one-quarter of the 51 economists polled said they look at the surveys from the Cleveland and Dallas Fed banks as the most accurate assessors of inflationary trends.

"While these measures are a long way from perfect, they are so simple and their track records are so good, that I think they are going to become increasingly valuable," Cleveland Fed economist Michael Bryan says.

Dallas Fed President Fisher notes that energy demand, and prices, have been under "sustained" pressure in the strong global economy. Automatically excluding energy from the inflation picture might not be a good idea, he says.

While the Dallas Fed bank's inflation gauge has eased in recent months, the decline has been extremely slow, Fisher notes. Looking at the data, "I'm still very careful in stating any optimism that we have got inflation where we want it."
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Care4all said:
Actually Dung, this is what your article says....that with consistant rises in oil and food, THEY SHOULD BE INCLUDED in the core rate of inflation...

Just as I was voicing above and others have too...
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But it's kind of a non-issue since they are included in the headline CPI rate. It isn't as though no one knows what the inflation rate is if we include food and gas. We know perfectly well what it is.

Having said that, moving towards a more accurate assessment of the core rate would be a good thing.
 
Dungheap said:
But it's kind of a non-issue since they are included in the headline CPI rate. It isn't as though no one knows what the inflation rate is if we include food and gas. We know perfectly well what it is.

Having said that, moving towards a more accurate assessment of the core rate would be a good thing.
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Well, i think it does "matter" that the core rate is accurate if the "core inflation rate" is used for many other critical measurements by economists and Feds.

Making it accurate is a good thing as you said... somewhere down the road, a few decades from now, if this same situation arises again, it would be handy to have an accurate accounting of it all...so to make better decisions.

if oil and gas had not had sustained increases and were as volatile as they were previously, I can understand them not being included, but as noted this is NOT some wicked, wild, and haywire thing that is going on...it IS going on for a reason, there are demands vs shortages forseen that will probably not change...not by that much....food will be short and so will oil and gas, compared to global demand...I don't think they are going to fluctuate down that much or be that volatile...based on the overall projections of need/demand.

care
 
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