[tom_mellior]

Your housing index link seems to say that housing prices increased by 4% per year over the last two years (looking at the differences Jan 2017-Jan 2018-Jan 2019 [edit: clicking "10Y" shows essentially the same trend since 2012]). So unless nothing else in the economy increased in price over this period, I would say that whoever calculated a 1% inflation rate did not weight housing costs adequately.

[Whil-]

Housing prices normally aren't a part of the inflation calculation.

[tom_mellior]

"Normally" as in Denmark, or "normally" as in "anywhere in the world", or for some other meaning of "normally"? Why wouldn't it be if inflation is meant to be a measure of changes in the expenses of average households?

https://en.wikipedia.org/wiki/Inflation says "The measure of inflation is the inflation rate, the annualized percentage change in a general price index, usually the consumer price index, over time." and links to https://en.wikipedia.org/wiki/Consumer_price_index which says "The index is usually computed monthly, or quarterly in some countries, as a weighted average of sub-indices for different components of consumer expenditure, such as food, housing, shoes, clothing, each of which is in turn a weighted average of sub-sub-indices." and goes on to give an example (apparently ficional) in which housing makes up 41.4% of the index.

Edit: My copy of Samuelson and Nordhaus, Economics, 19th edition, has an example of a consumer price index including housing weighted at 42.4%. At that weighting, unless my math is off, the remaining 57.6% of the stuff in the index would need to get cheaper by 1.2% to get to overall 1% inflation with a 4% increase in housing prices:

    42.4 * 1.04 + 57.6 * (1 - 0.012) = 101.00479999999999

Some things do get cheaper over time (like consumer electronics, sometimes), but others not so much.

[MagnumOpus]

- Normally as in almost everywhere in the world (apart from a few places like Sweden I think?)

- Buying a house is not a living expense, it is a capital investment. This is the reason why statisticians either only include rents (e.g. the EU Eurostat) or replicate the housing costs of owner-occupiers with an “owners equivalent rent” (the US BLS does this).

- Housing might be 30% or more of CPI in the US but none of it is house prices for the reason above. Most of it is rents and owners equivalent rent, some of it is furnishing costs, some of it is utility tariffs, some of it is costs of repairs and maintenance.

[tom_mellior]

> Normally as in almost everywhere in the world (apart from a few places like Sweden I think?)

Aren't you contradicting yourself when you go on to say that both the US BLS and Eurostat do include housing in their indices?

> statisticians either only include rents [or] “owners equivalent rent”

OK. So housing is part of the CPI, yes?

If I understand https://www.ecb.europa.eu/stats/ecb_statistics/escb/html/tab... correctly, Eurostat weights "actual rentals paid by tenants" at 6.1%. (edit: ECB, not Eurostat)

> none of it is house prices

This is the first mention of "house prices" in this thread. The index linked in the ancestor comment called itself "housing", not "house prices". Good for you if you insist on making the difference, but then if you make the difference you are not talking about the thing I was talking about, I think.

Also, some of it is house prices if house prices factor into the "owners equivalent rent", or is that made up out of thin air? Also, rising house prices cause rising rents, so indirectly they are represented anyway.

[Whil-]

This is without up to date fact checking so take this with a grain of salt, but during the last housing crisis I remember looking this up and came to the conclusion above. I don't actually know if it's universal but it was valid for Sweden at that point in time. I think the key word in your text above is "expenditure", where a house maybe isn't seen as an expenditure but rather an investment..?

When taking about inflation it's also always good to remind one self that the pool of money also changes. And the fact that housing usually is connected to mortgages, which in turn expands the amount of available money. But this paragraph has nothing to do with your comment so I'll just stop there!

[tom_mellior]

Thanks for your comment. I was a bit intrigued, also in light of the sibling discussion, so I tried to look this up without spending too much time on it.

This document "How is inflation measured?" from the Riksbank: https://www.riksbank.se/globalassets/media/rapporter/ekonomi... doesn't give weights in general but does say this (emphasis mine): "the method in which housing costs for owner occupied housing are measured are an important source of non-comparability, partly because they make up a large proportion of the CPI (around 10 per cent in sweden)". Note the "owner occupied" part, so this isn't even just rents! But then I don't understand the rest of the discussion that follows this.

Also Statistics Sweden at https://www.scb.se/en/finding-statistics/statistics-by-subje... lists "Housing, water, electricity, and fuels" as one of the "main groups" in the CPI, though this only suggests but does not prove that housing does have a non-zero weight.

[ben509]

"The inflation rate" generally means CPI-U[1] in the US or some similar "basket of goods" in other areas. So, this is correct, as we're usually looking at urban consumers, it would include rent but not housing.

As another poster mentioned, though, inflation or deflation as general concepts can refer to any price or cost that increases or decreases.

[1]: https://www.bls.gov/news.release/cpi.t01.htm