tag:blogger.com,1999:blog-6123361182187733668.post8268464087506703150..comments2011-10-19T07:28:37.786-07:00Comments on It Only Gets Better: "Today, it is Friday"Dee Moneyhttp://www.blogger.com/profile/02892839688150904558noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-6123361182187733668.post-43677673285034955012011-06-02T12:22:21.530-07:002011-06-02T12:22:21.530-07:00Thank you for the response, those charts are very ...Thank you for the response, those charts are very cool. I would have never known where to look to find those two pieces of data (especially with nearly 300 of them on that page!)Rajhttps://www.blogger.com/profile/03352785721804368234noreply@blogger.comtag:blogger.com,1999:blog-6123361182187733668.post-12489893495943631722011-06-01T09:46:58.576-07:002011-06-01T09:46:58.576-07:00Hi Raj, thanks for your comment - great question. ...Hi Raj, thanks for your comment - great question. To start, there are 2 types of inflation measurements: GDP inflation (and inflation measures for it's components - personal consumption, exports, etc.) and the CPI (consumer price inflation). This blog uses GDP inflation measures which are slightly lower than CPI. Further, the numbers you see on the news are typically national averages and inflation varies by region. Finally, inflation varies by product, depending on the supply and demand dynamics for that good or service at a given time. For example, people often look at "core" inflation (which excludes food and energy) for a "true" gage on prices since food and energy prices are so volatile it is not a reliable indicator of long-term trends.<br /><br />Increasingly, GDP inflation measures (specifically, the "personal consumption expenditure deflator") are becoming more widely used - when I refer to "real spending" in my blog, I am adjusting for prices by applying the "PCE deflator" - since I am only talking about our personal spending I would like to adjust for prices using the most compatible price deflator available (I would not apply the export price deflator for example). The Bureau of Economic Analysis kindly does this for us already. If you go to http://www.bea.gov/national/nipaweb/SelectTable.asp?Selected=Y and go to table 2.3.7 you can see the price changes for personal consumption expenditures by product. You will see that while nationally prices for the goods & services we consume stay within the "healthy" range you identified, individual products can vary significantly. Gas prices increased by 18% last year while recreational goods prices actually decreased by 6%.<br /><br />If you go to table 2.3.3, you will see quantity indexes for our real spending that gets to your question on looking at quantity trends using 2005 as a base comparison year ("base = 100"). Notice how we've actually bought less gas since 2005 but are "spending more" on gas because of the increase in prices. However, overall you will see we are actually buying more stuff over time even after adjusting for prices: the "quantity index" for the first 3 months of 2011 was "107".<br /><br />I hope this answers your question!Dee Moneyhttps://www.blogger.com/profile/02892839688150904558noreply@blogger.comtag:blogger.com,1999:blog-6123361182187733668.post-88832942917242179052011-05-31T10:55:16.311-07:002011-05-31T10:55:16.311-07:00And what a great weekend it was! It is interestin...And what a great weekend it was! It is interesting to see that spending is going up which is an excellent sign for the economy, but I can't help but wonder how 'real' spending is calculated. I've seen many news reports insisting there is no inflation beyond a healthy 2-3%, and yet in my experiences the prices of everything seem to be going up at a higher rate than that. If 'real' spending is being calculated under the assumption of normal inflation, than just looking at these numbers doesn't convince me of growth. Is there alternative data to look at, like quantity of goods purchased or an easy to understand breakdown of 'real' prices?Rajhttps://www.blogger.com/profile/03352785721804368234noreply@blogger.com