BLS: more bad data, more bad methodology

from the article enbreastled "Why Inflation Seems To Have Sharper Teeth Than the CPI Suggests" by David Wessel, WSJ March 16, 2006, p. A2.

quote:

"Write about inflation, and readers are quick to complain that the U.S. government's consumer- price index fails to capture the reality of rising prices."

"'If you did your own personal study of inflation in your neighborhood...where you shop, you would be appalled at how much prices go up without being reported as inflation,' Reggie Marselus emailed from Lenexa, Kan. 'Government inflation figures are the most bogus numbers reported in the entire economic world.'"

"The BLS releases the latest CPI this morning. Forecasters say a drop in gasoline prices in February will keep the monthly increase in the CPI to a comfortable 0.1%, though that still is a sharp 3.7% above a year ago. Wall Street traders, private forecasters and the Federal Reserve officials will scrutinize the details to divine if energy- price increases are spilling over into other items, pushing up inflation."

"Americans coping with rising health-insurance premiums, or paying college or private-school tuition bills, or trying to buy a house, look at those numbers and scoff. The cost of living, they often say, seems to climb a lot faster. Some economists don't much like the most commonly used version of the CPI, either. They say it overstates inflation, but that is another story."

(snip waffling by an interviewed BLS person)

"U.S. government inflation figures also recognize that a $1,500 personal computer available today is more powerful than a $1,500 PC purchased three years ago. If it is twice as powerful but carries the same price tag, then the BLS counts that as a price cut, a decline that offsets price increases in other things." did everyone catch that fudge?.

"And, then there is housing. To the consternation of some economists, the CPI doesn't track the rising price of houses directly, but instead relies on rents, which have been rising more slowly than house prices. The rationale: The CPI tracks the cost of living in a house, not its investment value or, should it be looked at in terms of its total cost?. 'Homeowners are buttumed to rent to themselves at the market rent,'huh? the BLS explains. Japan does the same. Europe, in contrast, currently excludes owner-occupied houses from its pan-European price index."