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Food prices are very visible to many of us. However, it only constitute 11.2% of household income. That is why CPI numbers are not changing as much as otherwise perceived.
That doesn't mean however that the cost of food hasn't gone up. It might just mean that the cost of everything else has gone up even more taking away from the income pile one might have used to buy a better grade/quality of food (e.g the chuck roast instead of the sirloin, the store brand instead of the name brand etc.). There's a whole lot more to this story than that simple undocumented graph.
Reply to @Mark: Mark, I can't access your URL. This graph is not denying that food prices has gone up. In fact that is not the point I am making. What I am saying that food is a small portion of what Americans spend their money. So, food inflation is not moving the CPI figures that much as a lot of stuff that also use and also in the CPI basket has not moved as much.
A lot of us look at what we are paying for food and judging that CPI is not right. This is unfortunately not correct.
Now I also said that personal inflation is different for everyone. CPI is for big masses. In your household your food consumption could be much higher. Or if you are a frequent user of medical services, medical inflation will affect you much more. If you have college kids, college cost year to year increases is way above CPI.
All this graphic is saying that we are often negotiations on a small portion of our spending. In emerging markets people spend 2/3 of their income on food. Now that really makes a big difference.
Reply to @Investor: I had no trouble accessing the linked document. If you want to see if go to the front page of Yahoo Finance or google this title "For the middle class, expenses grow faster than paychecks."
I think we are in agreement especially in the matter of personal inflation and I'd also suggest that it's that figure that is of more concern and impact to most people than the governments quasi-official CPI number.
Reply to @Mark: I am on iPhone right now and will try to reach your URL later on a laptop.
You cannot expect your individual inflation to be the figure that government uses for macroeconomic decision making. This is where most discussions about CPI going wrong.
Comments
http://finance.yahoo.com/news/middle-class-expenses-grow-faster-111900178.html;_ylt=AgVczVMoR.vq07LJWg9mHcqiuYdG;_ylu=X3oDMTN1bnFjdTc4BG1pdANGaW5hbmNlIEZQIE1lZ2F0cm9uIDIEcGtnAzAzODU0NTVjLWZmYmQtM2EzMi04NjlhLTZmMjEyZTAxYmE5NARwb3MDMQRzZWMDbWVnYXRyb24EdmVyAzYxMDgyYzAzLTg1YjAtMTFlMi1iMmVmLTk2NTFlZTdhMzc0NQ--;_ylg=X3oDMTFpNzk0NjhtBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3NlY3Rpb25z;_ylv=3
A lot of us look at what we are paying for food and judging that CPI is not right. This is unfortunately not correct.
Now I also said that personal inflation is different for everyone. CPI is for big masses. In your household your food consumption could be much higher. Or if you are a frequent user of medical services, medical inflation will affect you much more. If you have college kids, college cost year to year increases is way above CPI.
All this graphic is saying that we are often negotiations on a small portion of our spending. In emerging markets people spend 2/3 of their income on food. Now that really makes a big difference.
I think we are in agreement especially in the matter of personal inflation and I'd also suggest that it's that figure that is of more concern and impact to most people than the governments quasi-official CPI number.
You cannot expect your individual inflation to be the figure that government uses for macroeconomic decision making. This is where most discussions about CPI going wrong.