B-b-b-but when last quarter's 2.8% GDP growth was reported, it was based on an annualized inflation of 0.4%! Those were the official numbers!
Using realistic inflation numbers around 3 or 4 % (a very conservative real-world estimate), real GDP growth would've been zero or negative. But nobody wants to hear that. Look! The market's at 13,000!
pgg, can you post a link for the 0.4% rate? I can't find any information regarding this. The Bureau of Labor statistics seems to be
putting out annualized inflation rates around 3%, so I don't know where the 0.4% is coming from.
As for this new inflation, it honestly increases my belief in the reliability of the government's estimate. Sure, the government fudges the number when it can (e.g. using renting vs. buying costs), but the AIER itself finds
the cost of food, prescription drugs, and tobacco also have increased faster than the government's inflation measure, rising 3.56 percent, 4.21 percent, and 3.4 percent, respectively.
Their 8% comes from the whopping 20% inflation rate we're seeing in gasoline. Gasoline rates typically rise in the summer, and additionally, we're (slowly) coming out of a very bad economy. So, it's natural that prices are going to rise. Check out this graph:
Considering fossil fuels are a finite resource desired by an ever expanding group of people, I'm surprised they're not even higher than they are now. They probably will continue their price increase.
But the AIER's inflation rate only accounts for 40% of a typical family's monthly budget. Housing is a huge portion of most family budgets, so if the housing/rental prices aren't going up very quickly, that's less inflation a typical family will feel.
All in all, I think the AIER's index certainly helps add information to the picture, but I can't say I'm convinced their estimate should be seen as a replacement for the CPI.
