Monthly versus Annual Inflation Data
A friend on Facebook writes:
Many in the MSM (mainstream media) will lie to your face. Be discerning. Prices rose 8.5% year over year in July. That is NOT a significant slowdown. If you only lost 1/12th of your money since last July, that really is not an improvement in circumstance after losing 1/11th of your money since last June. That is what these malefactors are trying to argue here.
I won’t mention the friend’s name: my policy when I quote from FB is to never name the person I’m quoting without first getting his/her consent.
But actually, if the data say that you lost 1/12 of [the value of] your money since July rather than the 1/11 that you lost from June 2021 to June 2022, that is quite possibly a huge improvement. It depends crucially on your baseline.
Here’s the first paragraph of the BLS’s August 10 report on the latest inflation numbers:
The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in July on a seasonally adjusted basis after rising 1.3 percent in June, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 8.5 percent before seasonal adjustment.
If your baseline is, as it seems to be for most people, that inflation will continue at a high level, then going from 1.3 percent in a month (June) to 0 percent in a month (July) is a huge improvement.
If your baseline is the purchasing power of your dollar 13 months ago, then finding out that it has lost no additional purchasing power in the 13th month is not an improvement at all.
What is clear, though, unless the data for July are updated to reflect an actual increase in the CPI in July, is that his statement, “That is NOT a significant slowdown” is incorrect.
Here’s an example of someone who doesn’t get it:
When you lost your last game 91-0 then bounced back to lose your next game 85-0 https://t.co/jm4ErnWlPA
— David Burge (@iowahawkblog) August 10, 2022