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[Sergarr]

So it's unreasonable to average out that number for twelve months, got it. Or you could just say 'CPI would be too high if we took food and energy cost inflation into account in the main indexing' and be honest.

Yes it is unreasonable.  Food prices change more in a non-exceptional month then most prices do in a year.  And they go up and down very rapidly unlike inflation which follows trends.

Most inflation is controlled by long term changes in technology, money supply, labor supply, etc.  Food prices are mostly controlled by weather and biological events that are very, very unpredictable.  The long term trend is controlled by those same things but the short term trend is much more erratic.

Economists are perfectly honest about why we exclude food prices from the core inflation rates we really care about.  Very few inflation trends wont show up in core inflation more clearly.  With some high tech items its more difficult and complicated but not with food.

"The price is volatile" doesn't give any creedence to leaving out ~20% of a person's spending in a number that claims to track their buying power over time. That is why it's an index. It can go up and down. Why should the inflation index be limited to numbers that are artificially picked and chosen for their low rate of inflation, and how does that help anyone besides people who are lying about actual underlying price cost increases?

Food prices have risen nearly double [or more..] since the early 00's. Why isn't this relevant to consumers? You're saying that getting half the food in a product you buy than you did ten years ago isn't a significant factor to consumer buying practices? Or?

You forget that salaries tend to increase over time.

[Mictlantecuhtli]

You forget that salaries tend to increase over time.

Spoiler (click to show/hide)

Actually, if you cross reference just the doubled food prices with this the consumer has lost ~30% of buying power because of food prices.

Spoiler (click to show/hide)

This is how a disconnection between actual purchasing power and a manipulated 'inflation' number can diverge slightly from reality.

[Sheb]

Mict, those are US graphs.

Also, how could consumer loose 30% of their purchasing power with food price increase alone? Food purchase don't even account for 30% of purchases in the US.

[Mictlantecuhtli]

Mict, those are US graphs.

'Salaries increase over time' is incorrect for the USA, so that doesn't explain doubling food prices. I am also explaining that CPI doesn't take into account the food price change because it's increasing too fast to add to the CPI main without causing people to realize maybe we actually have inflation built into our economies. The CPI is rigged to give an impression of low inflation.


Also;
If your income hasn't increased and your 20% expenditure becomes 40%, it's about a 25% drop in net purchasing power. Adjust your spending down or lose money. If you're buying less food today than you did ten years ago just because the product costs the same for less of it, you've lost purchasing power on your dollar thanks to inflation. In this case about 25-30%. 30% is the high number, if food prices only doubled it would be a flat 25% loss.

[Sergarr]

Well I'm not starving, and neither are my relatives. In fact, I haven't heard of anyone who didn't have enough for food, and the people around always seem to find money when they really want to buy something (IIRC one of them has buyed the iPhone 6 literally 2 days from it's launch). Maybe your statistics doesn't include in the factor of "gray salaries", which are really popular here in Russia for tax evasion reasons.

[smjjames]

Well I'm not starving, and neither are my relatives. In fact, I haven't heard of anyone who didn't have enough for food, and the people around always seem to find money when they really want to buy something (IIRC one of them has buyed the iPhone 6 literally 2 days from it's launch). Maybe your statistics doesn't include in the factor of "gray salaries", which are really popular here in Russia for tax evasion reasons.

He's also not even looking at Russian statistics, which is what we actually should be looking at.

Plus the food prices probably aren't hitting everywhere in Russia equally.

[Mr. Strange]

@erkki: Doesn't seem like Russia wants friends do they?

Dunno. I hope it doesn't get out of hand, or doesnt before I get back from my upcoming trip to St. Petersburg in March. 

Don't worry, if you get stuck there we will send postcards every day untill russians release you. I suspect they'll return you ASAP.

[mainiac]

"The price is volatile" doesn't give any creedence to leaving out ~20% of a person's spending in a number that claims to track their buying power over time. That is why it's an index. It can go up and down. Why should the inflation index be limited to numbers that are artificially picked and chosen for their low rate of inflation, and how does that help anyone besides people who are lying about actual underlying price cost increases?

Food prices have risen nearly double [or more..] since the early 00's. Why isn't this relevant to consumers? You're saying that getting half the food in a product you buy than you did ten years ago isn't a significant factor to consumer buying practices? Or?

In a complicated subject we must make tradeoffs.



We talking about a 3% gap over the course of 13 years.  In that context talking about changes in a single item in a single month is a perfect example of missing the forest for the trees.  Yes that data is extremely useful given enough time.  But we dont want to wait a decade for information.

If we want to talk consumer purchasing power there are much better sources of information on that.  Want to know what food prices will do to buying power?  Dont wait to see costs over 10 years, ask farmers what their production numbers are looking like for the upcoming year.  Want to know energy?  Whats the output looking like?

[Mictlantecuhtli]

He's also not even looking at Russian statistics, which is what we actually should be looking at.

Plus the food prices probably aren't hitting everywhere in Russia equally.

I mentioned the russian inflation first; mainiac responded with 'food inflation isn't linked to actual inflation'. I am not talking about overall Russian inflation or the implications of CPI on them specifically. But in fact, the discussion can be extrapolated to any nation. The USA is just an easier example for me, since I know our food prices have doubled and I know our 'CPI' isn't reporting it. Russia could very well be repackaging things with 50% the product to hide food inflation, but I don't know.

I do know that 16% inflation in food prices in one month is a very bad number to achieve, especially if it isn't average through the nation. If it isn't being felt in moscow than the other areas which are getting this inflation must be hurting very badly.

We talking about a 3% gap over the course of 13 years.  In that context talking about changes in a single item in a single month is a perfect example of missing the forest for the trees.  Yes that data is extremely useful given enough time.  But we dont want to wait a decade for information.

I am about 99.9% sure the divergence is more than 3%. I've lived long enough to see food packaging become half of what it was ten years ago for the exact same cost. For a 15-20% amount of your budget [I am sure that number is more now with the entrenched food price increases around the world], this is a huge change in ten or fifteen years. You've either stopped buying half the food you used to, or you spend twice as much as you did before.

If we want to talk consumer purchasing power there are much better sources of information on that. Want to know energy?  Whats the output looking like?

I agree. Looks like consumers have had to spend double on energy in the last ten years as well, another number totally ignored and misrepresented by the current CPI.

[mainiac]

I am about 99.9% sure the divergence is more than 3%. I've lived long enough to see food packaging become half of what it was ten years ago for the exact same cost. For a 15-20% amount of your budget [I am sure that number is more now with the entrenched food price increases around the world], this is a huge change in ten or fifteen years. You've either stopped buying half the food you used to, or you spend twice as much as you did before.

Food prices for different items move in different directions and the purchasing power of currencies decline in non-food items as well.

I showed you a representative index including food and energy to a representative index not including food or energy.  That was the difference you said was vast.  No, it's 3% over the course of a decade and a half that included the largest economic disturbance since the great depression.

I agree. Looks like consumers have had to spend double on energy in the last ten years as well, another number totally ignored and misrepresented by the current CPI.

FFS, that statistic is something completely different from what you are talking about.

[mainiac]

I think that's because Russians have more cameras in cars.

[10ebbor10]

Yeah, IIRC Russia had some kind of epidemic of people throwing themselves in front of cars for insurance money, and now everyone has a dashcam.

[Mictlantecuhtli]

Russian insurance companies sometimes require dashcams since auto incidents happen so damn much.

Food prices for different items move in different directions and the purchasing power of currencies decline in non-food items as well.

Not according to actual numbers which show across the board increases since the 1990s.
http://fas.org/sgp/crs/misc/R40545.pdf

These numbers are from 2007-onward, but the results are exactly what I'm saying to you.

As stated earlier in this report, lower-income consumers who spend a significant share of their household budget on food are likely to be impacted more severely by rising food prices, to be more responsive to price changes, and to be forced to make more difficult budgetary tradeoffs than high-income consumers with lower food budget shares.

How do you explain the SNAP budget going from ~18 billion in 1990 to ~80 billion today, anyways? Because food prices are going up much faster than is indicated with manipulated CPI numbers and wages haven't kept up with such entrenched inflation? You could even say the SNAP budget multiplying by 5 times since the stabilized levels of food pricing is indicative of exactly what I'm telling you; that food prices have risen substantially more than is dared reported and it hurts the consumer and especially their spending power in major ways.

[mainiac]

How do you explain the SNAP budget going from ~18 billion in 1990 to ~80 billion today, anyways?

Major structural changes in the US welfare system.

How do you explain that I'm supposed to have intimate knowledge about every aspect of anything in the economy to do with food prices while you can flit from subject to subject asking questions?

[Mictlantecuhtli]

Because you're literally dancing around any conclusion except the correct one shown to you directly with numbers, I atleast expect you to go through some acrobatics to deny the facts. Food prices have gone up so much that they're willingly excluded from real CPI numbers, such as how people now spend twice on energy than they did in 2004 but you wouldn't know that with the CPI. [A point you brought up that was ignored after I showed you those prices have doubled]

You just said the variance is different by category, yet all categories of food items have doubled or more since the time period of the 90's where it was at a stable historical level.

Basically, you're trying to tell me the sky is red.

You simply can't ignore this chart and keep acting like food inflation isn't a real and serious issue to current consumers and their purchasing power. I also especially enjoy 60 billion in new people applying for food stamps isn't somehow indicative of food prices being too high for consumers.