Inflation Targeting (The Poor)

I wish to draw your attention to the details of the latest CPI report (links below).

Note the 3 months ended April 2008 column in Table 2. It shows the annual inflation rate using just the last three months of data. The data is seasonally adjusted.

Overall: +2.3%

The last three months have been relatively tame overall. We're working on a 2.3% annual pace which isn't bad. However, the details are worth looking at.

Food at home: +8.3%
Food away from home: +3.9%

Food is ~14% of the CPI-U (as seen in Table 1) and it is a fairly even split between eating at home and eating out (8% vs. 6%). Therefore, if you spend a lot more on groceries than you spend in restaurants then inflation is currently hurting you more (a lot more).

Rent of primary residence: +2.9%
Owners' equivalent rent of primary residence: +2.3%

Rent is ~30% of the CPI-U. If you rent from someone else then inflation is currently hurting you more. It could also be easily argued that the owners aren't enjoying the deflationary price drops of their homes either (which is not included in the CPI). Let's just call rent a lose-lose situation these days.

Lodging away from home: -13.5%

That's ~3% of the CPI-U. If you spend less than 3% of your budget on hotels then deflation is currently helping you less.

Fuels and utilities: +24.0%

That's ~5% of the CPI-U. If you spend more than 5% of your budget on household energy, sewer, and water bills then inflation is currently hurting you more (a lot more).

Motor fuel: -10.4%

That's ~5% of the CPI-U. If you spend more than 5% of your budget on motor fuel then deflation is helping you more (a lot more). Just a few problems though. Motor fuel (gasoline) was up 21% year over year, crude oil is currently $125 a barrel, and gasoline is on the rise yet again.

As a side note, keep in mind that this data is seasonally adjusted. The negative rate above doesn't necessarily mean that gasoline prices actually fell. It more than likely means that prices simply didn't rise as much as they normally do this time of year.

In case you are curious, I'm a homebody. In comparison to the averages, I'm hurt by food and lodging away from home (since I eat mostly at home and those costs are going up faster) but I'm generally helped by motor fuel (since I don't drive much). I'm also watching my home deflate (but hopefully my rising property taxes will too, or at least stop rising parabolically).

Source Data:
Table 1. Consumer Price Index for All Urban Consumers (CPI-U)
Table 2. Consumer Price Index for All Urban Consumers (CPI-U)