You want Table 1 in the linked doc. The summary is the things getting more expensive fastest are also things that have lower weighting. In household budget terms, our biggest expenses by far are:
- housing
- health insurance
- childcare
Those have not gotten much more expensive (our health insurance got cheaper this year, housing is flat, childcare had a modest increase). Meanwhile gas for the vehicles costs much more, but comparatively fuel is a minor expense. When we weigh everything for our household, 7.5% seems high.
I think your household may not track with many others. Not disagreeing with your personal number as I am sure they are accurate but for most they are very different.
Housing is sky rocketing across the US. Rents are up over 30% in a lot of markets. Child care is basically free for most people after their kids start elementary school. Groceries are far more expensive than they used to be, I am going to estimate at least 20%. For me a very rough estimate of inflation is probably 15%. Luckily I have a 30 year fixed on my mortgage, if i was renting it would be far more. Rents in my city are up 25% last year and expected to increase a further 20% this year.
Most people, like you, do not rent and are not exposed to this at all. Further, 30% y/o/y rent increases are limited to a tiny minority of cities (I would even suspect 30% is an exaggeration for any major metro).
> Child care is basically free for most people after their kids start elementary school
I can't tell whether this is a troll or not. In case you're serious, consider that school dismissal is in the middle of the afternoon, and generally speaking someone has to get the kids home and occupy them for a few hours. This is of course before holidays, summer break, and extracurriculars.
> Groceries are far more expensive than they used to be, I am going to estimate at least 20%
Your estimate is likely not as accurate as the BLS's estimate of 7.4%. (Caveat: many people who read HN are rich or high earners, and so they may eat different food than most Americans. That food may have increased at a faster rate.)
> Rents in my city are up 25% last year and expected to increase a further 20% this year.
This is why BLS weighs expenses. Neither of us is exposed to this at all.
> Most people, like you, do not rent and are not exposed to this at all.
Perhaps, but if it were generally true, inflation stats would over-reflect it rather than ignoring it; the housing component is entirely rent driven (it reflects actual rents and the rent forgone by homeowners not renting out their homes), so in a situation where rents are increasing but mortgage expenses are flat, it overstates the impact of out-of-pocket housing costs (it does the reverse when purchase/mortgage expenses are increasing faster than rents.)
I agree that arriving the specific component weighting is really difficult, especially alongside the need to make comparisons over time and the changes in household makeup, etc. The concept that housing prices increasing/decreasing rapidly does not change household budgets for most Americans is the salient point that people are missing.
Because of the way shelter costs enter into the CPI, these increases in owned home and rental costs have not yet contributed much to overall inflation.
Our analysis, however, suggests that these higher shelter prices are likely to soon show up more clearly in the monthly CPI, potentially adding several more basis points (hundredths of a percentage point) to monthly inflation than they do now.
If you own your house, your cost did not go up. Most Americans own their homes. That's how to look at it. The inflation has likely been a net good for you if housing costs in your area have increased.
As part of the market, your opportunity costs go up. Meaning you need a higher sale price to offset a higher buying price if you want to move.
Or that locking in that current cost means less inventory on the market.
Housing costs going up across the board is only good if you have a surplus of inventory to sell that doesn’t need immediate replacement. Ie, not your primary home.
People owning only their primary residence are at best breaking even, despite amortizing their (cheaper) purchase price beyond a market increase.
My housing expense is flat. I own my home, and my housing expense will be predictable (and relatively capped) for as long as that is the case. So yes, my housing cost has been flat.
Yes, the plumber will charge me more. No, you would not be able to determine that if you had my financial records, because I don't spend an appreciable fraction of my income on plumbers (or lawn care, or electricians, or other home services outside of child care).
The same applies to electricity and gas; the expenses are there, but a 10% rise in all of my utilities is still not meaningful in my overall budget. For comparison, I can easily see a 10% swing in annual heating bills based solely on the average temperature during 3 months of the year.
Yes, I am impacted by all the same things you are. But my health insurance expense dropped 3% and that dwarfs all the other category increases. This is why the BLS weighs their basket.
> I'm struggling to understand how inflation is only 7.5% when every major line item comprising inflation is up much more than 7.5% over the past year.
They aren't. Food, apparel, medical care commodities, and non-energy services are up less than the overall amount. The things that are up more just get mentioned more because big numbers are newsworthy, small numbers aren't.
Where are you seeing that? Here's the latest CPI [1]. Click "show table" for the full info. Food is at 7%, housing at 4.4%, clothing at 5.3%, etc. I don't have the 2022 weights for each category handy, but here's 2020 [2].
CPI is taken using an average family's basket of goods. If you have different consumption patterns from the average family your effective inflation may differ.
- housing
- health insurance
- childcare
Those have not gotten much more expensive (our health insurance got cheaper this year, housing is flat, childcare had a modest increase). Meanwhile gas for the vehicles costs much more, but comparatively fuel is a minor expense. When we weigh everything for our household, 7.5% seems high.