Could The Price Of Chocolate Chip Cookies Predict The CPI? A Look Behind The Inflation Headlines

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Now that the debt-ceiling non-crisis is behind us, the headlines are again full of debate and hand-wringing over inflation, interest rates, and the recession that stubbornly refuses to reward all those economists who have been predicting one since the winter before last.

The future did look bleak last June when the annual inflation rate topped out at 9.1%. Despite the steady drumbeat about the dire threat of rising prices, inflation has been steadily declining, with the latest year-over-year Consumer Price Index down to 4%.

As someone whose career has been spent gathering and interpreting consumer data, I’ve been suspicious of those negative forecasts since the winter before last. As a consultant to retailers, the signals just weren’t there that would have suggested consumers were holding fast to their wallets. Also, how can you have a recession if everyone who wants a job is working — and many are holding down two jobs?

Recently, I took a look at some of the data behind the data, especially the CPI, which is hugely influential. What exactly goes into a calculation that is supposed to measure a vast, complex economy and produce a number that government agencies and businesses will rely on to make major decisions?


In the trenches where consumers live, is it that much harder to make ends meet today than it used to be? Are motor fuels really expensive, or are eggs? How about chocolate chip cookies?


The first thing I noticed is that, in reporting economic news, media outlets and content sponsors use charts and data that are relatively short-term and thus distort the big picture. Financial media website Investopedia, for example, ran this headline in February: Consumers May Face 'Reckoning' As Inflation’s Descent Slows. With it was a chart depicting a precipitous decline in real wages, explaining that “price increases have eroded the buying power of wage increases.”

Although it’s a factual statement, the problem with the chart was that it only covered the pandemic years, which began with a massive spike at the start of the crisis. As of this past January, real wages — taking into account the erosion — were not “in retreat,“ as the chart title declared. In fact, they were unchanged from before the pandemic. A more accurate title might have been “Real Wages Return to Normal.” Not very exciting, but accurate.

Gasoline is another excellent example. It is a marquee component of the CPI. Gas prices topped out at $5-plus a gallon last summer, helping to boost the CPI to that breathtaking 9%. But what about the real price of gasoline over decades, after adjusting for inflation’s effect on the buying power of a dollar? Surprise! A gallon of gasoline costs about 20% less today than it did fifty years ago.

It’s true that housing expenses, especially rents, have outpaced inflation over the years, but not by as much as the news would suggest. According to data from the US Department of Housing and Urban Development, the median rent in the 21st century so far has increased at a reasonable annual rate of 3.15%. How is that possible when rents in many cities jumped by double digits during the pandemic? The Great Recession that started in 2007 crushed the real estate market and kept rent increases modest. You could say landlords were catching up.

The US Bureau of Labor Statistics (BLS) publishes average price data and charts for about 70 food items, the cost of living we feel every day. The list includes the usual suspects — eggs, bacon, potatoes, apples, chicken — and a few that were unexpected, including hot dogs, peanut butter, and, yes, even chocolate chip cookies. In fact, the BLS has been tracking the cost of America’s favorite sweet since 1980.

Using the BLS charts, the average price of a pound of peanut butter today is about $2.50. But adjusted for inflation, the cost today would be about $4.30. By that measure, peanut butter is a bargain.

Other unscientific findings: until recently, inflation-adjusted egg prices had remained unchanged for over 20 years. Electricity rates are about 40% cheaper than they were in 1978 after adjusting for the buying power of a dollar.


Bad news sells, and headlines that say “back to normal” are a big yawn. But when running a business or making public policy, headlines are not data points.


In an age when attention spans have shrunk to milliseconds, the challenge for leaders is to avoid knee-jerk reactions to the latest craze — pandemics, metaverses, cryptocurrencies, and now AI — and pay attention to the businesses they manage. One factor that never needs adjustment for inflation is getting to know and serve customers.  2023

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