Thursday, January 16, 2014

Nice graphic showing all the items in the Consumer Price Index. Lots of numbers but I see something else...

Here is a graphic (Business Insider) that presents the latest Consumer Price Index (CPI) for November (2013) in a very helpful way. It orders the change in prices of the items in the "market basket" of goods and services the Bureau of Labor Statics tracks on a monthly basis from high to low.  There are 175 items listed below.  The numbers are small because they represent the percentage change from a year earlier (November 2012).

If you were to add up all the positive numbers that extend to the right and subtract all the negative numbers that extend to the left  you would come up with a year over year percentage change of 1.2%.

Relatively low inflation, indeed.

Observation:  What you see is a bunch of numbers.  What I see is globalization.  Compare the change in prices of the top and bottom 10 items. The goods and services at the top of the list are considered "Non-Tradable" items. They are produced domestically and are virtually impossible to "off- shore". They are not so much subject to global competitive price pressure. These prices tend to increase consistently.

The goods at the bottom are "Tradable" and subject to the competitive price pressure of being produced off-shore.  These prices tend to decrease, or at least remain stable, over time.

Source Business Insider (go here for larger image)

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