Oleg Zabluda's blog
Wednesday, May 16, 2018
 
Lies, Damn Lies and Inflation
Lies, Damn Lies and Inflation
"""
inflation figures have quite different meanings, thanks to different treatment of housing and, to a lesser extent, health care. The most dramatic difference is housing: In the U.S., shelter makes up a third of the consumer-price index, because it includes an imputed rent for homeowners. In Europe only actual rents are measured, at a weight of just 6% of the basket of goods and services underlying the price index.

Measure both using the European approach [...] this measure—known as the harmonized index of consumer prices, or HICP [...] which is still an experimental statistic, but the CPI excluding shelter, food and energy is the best equivalent to core eurozone inflation, and exactly the same at 1.2%.
[...]
The Fed’s preferred inflation gauge, the PCE price index, takes a sixth of its weight from rent and imputed rent. The gap from CPI weights is made up mostly by including employers’ health-care costs to get a health-care weight of a fifth. In Europe the equivalent health-care costs, mostly borne by government, are ignored in HICP, and booze and smokes are almost as important as health-care in determining inflation.
[...]
Central bankers, like all economists, form their views from statistics that often turn out to be wrong or misleading, half-truths about how the economy works and guesses as to how markets will respond.
"""
https://www.wsj.com/articles/lies-damn-lies-and-inflation-1526316237
https://www.wsj.com/articles/lies-damn-lies-and-inflation-1526316237

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