On June 10, the government released its report on the Consumer Price Index (CPI) for May of 2021.  These numbers can be sliced and diced in many ways.

Inflation: Nothing to See Here?

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2021-06-14 23:00:12

On June 10, the government released its report on the Consumer Price Index (CPI) for May of 2021. These numbers can be sliced and diced in many ways. I am going to show you one reasonable way to look at the figures, and this indicates an annual inflation rate of 8 percent. This is the highest since the summer of 1982. That is thirty-nine years ago, perhaps even before you were born.

How should one measure the annual rate of inflation? When I was younger, the media reported the annualized one-month rate of inflation. If the CPI went up by 1 percent from one month to the next, reporters would multiply by 12 to get a 12 percent annualized rate of inflation. In fact, because of compounding, the true annualized rate would be even higher, about 12.7 percent.

For May of 2021, the government reported a one-month increase of 0.6 percent. Multiplying by 12 gives 7.2 percent as the annualized rate of inflation. But I have not seen any news media reporting this number.

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