Via Global Macro Monitor,
What’s The Matter Kansas inflation?
The divergence of official inflation as measured by the government versus inflation realized by the consumer and businesses has never been greater, in our opinion. Go ask anybody on the street in America and Europe if think ‘doing life or business’ is getting more expensive.
We have some thoughts on what is the matter with the inflation data:
1. Defining inflation
What is your definition of inflation? What are we trying to measure? The prices in a consumer basket of goods and services? Wages? Asset prices?
2. Measurement problems
The official measurement procedures seem archaic given the advent of big data in the past few years. Even Bloomberg is out with a recent piece warning the Fed about low-balling inflation due to measurement errors.
Low-Balling Inflation Puts the Fed at Risk Beware of any metric that doesn’t fully reflect housing prices.
The U. S. has an inflation problem. It has nothing to do with inflation being too high or too low. Unlike the raging inflation of the 1970s, it doesn’t need to be solved with a lengthy and painful recession. Instead, it is a problem of measurement because the cost of housing – the single biggest expense for many Americans – isn’t explicitly included in the inflation data.
This post was published at Zero Hedge on Sep 29, 2017.