Brother Of Jerry
Date: February 01, 2023 06:35PM
I should have explained in more detail where I got those numbers from. As I understand it, the usual inflation number is a comparison of the Consumer Price Index versus what the CPI was year earlier.
I took the numbers I cited mostly from Paul Krugman's latest column (1/31), where he calculated the inflation rate based on a comparison of the CPI to 6 months ago rather than 12 months ago, then multiply by 2 to annualize the rate.
His rationale was that month to month numbers are too "noisy", with random small bounces up and down, that get magnified when multiplied by 12. For instance, the CPI for December was actually 0.1% lower than the CPI for Nov, so month to month inflation in Dec was negative - that is, deflationary.
He argued that with the rapid runup in inflation from around Oct 1920 to Jun 2022, followed by a steep decline after June '22, that looking backward a year to calculate inflation is too far back. It does not properly reflect a fast changing CPI.
So, 1 month too short, 12 months too long, 6 months a compromise to minimize noise but note rapid changes.
So, the 6 month change in CPI for December, annualized, was 2%.
The CPI food index for December was 0.3% (3.6% annualized), up from 0.2% (2.4% annualized). Food is not inflating at the rate it was a year ago.
I am checking rent prices on zillow because I may have to move in the coming year. Prices in SLC, which are typically in the $2k+ range for newer apartments, have dropped two to three hundred dollars in the last 4 months.
Long story short, inflation was pretty grim last summer. It has since dropped substantially, though the current CPI is still 6.5% higher than it was a year ago. If the CPI stays like it is right now (which may or may not happen), inflation 6 months from now will look wonderfully low, compared to the sky high CPI of last summer. It is already better than most people realize.