[matwood]

And to add to your explanation, because inflation jumped so quickly and then slowed we'll eventually hit a YoY number that plummets. If milk is $4/gallon today and still $4/gallon 12 mos. from now, that's 0% YoY inflation.

This will inevitably lead to people saying the numbers are fake because milk used to be $2/gallon.

[throw0101a]

> If milk is $4/gallon today and still $4/gallon 12 mos. from now, that's 0% YoY inflation.

Conversely, if there was a one-time jump in a particular item, it will take a year before it gets 'removed' from the inflation numbers.

Extremely contrived example: if gas/petrol was $1/L in December 2021 (and generally in all of 2021), but $1.20/L in January 2022, then there will be a 20% YoY jump in inflation for the January number comparing Jan 2021 to Jan 2022.

Now if gas stays at $1.20/L in February 2022, it will still register as 20% YoY even though the price has not changed month-to-month. That 20% (YoY) is "stuck" in the system until January 2023 when we're comparing $1.20/L to $1.20/L.

A one-time jump can 'skew' the numbers if all you look at is YoY metrics.

[JumpCrisscross]

Which is partly what we’re seeing. CPI rose 0.4% MoM in October, or 4.8% seasonally adjusted. That’s above target, but better than YoY.

[fizx]

Really wish we reported the 4.8% number. Seems more reasonable for a monthly report to focus on the changes of the month.

[Bootvis]

I agree it's confusing. I think they do it to remove seasonality and the experts on the topic probably don't understand anymore why the rest of us think their way of reporting is confusing to lay people.

[treis]

Seasonally adjusted != multiply by 12. Prices naturally fluctuate throughout the year due to weather, consumer patterns, and business cycles. Seasonal adjustment is an attempt to account for those changes.

[JumpCrisscross]

> Seasonally adjusted != multiply by 12

My brain swapped annualised with seasonally adjusted. Sorry.

[reedjosh]

Beyond seasonal price fluctuations, wouldn't it be 1.04^12 = ~6% annually?

[Izkata]

0.4% is 0.004, so 1.004^12 = 1.049... or 4.9%

[reedjosh]

Derp, yeah. Thanks.

[orra]

I agree the annualizing the monthly figure would be handy, as an additional figure. Looking at annualized monthly figures, it was also apparent (say) six months ago, that the monthly annual figures would almost certainly continue to get worse.

[thunky]

Also note the four most recent (seasonally adjusted) monthly CPI numbers:

  Jul 2022: 0.0%
  Aug 2022: 0.1%
  Sep 2022: 0.4%
  Oct 2022: 0.4%

[soared]

It’s not really skewing anything though, since the price is 20% yoy?

[danielmarkbruce]

It is skewing if you are looking for an up to date change. It's like, is it better to get two points on a curved line and draw a straight line through them, or is it better to calculate the derivative and the the slope at a specific point?

[joshuahedlund]

That depends on how noisy or smooth the changes are. That's why it's valuable to look at both.

[danielmarkbruce]

It may be - but to the above poster's point - if gas went up 20% in Jan of this year and then stays flat... is it helpful to think of prices as "going up" ? It seems misleading.

[jerf]

"is it helpful to think of prices as "going up" ? It seems misleading."

Here you are encountering a common human cognitive failing, which is the belief that there is some sort of objective answer to the question "are prices going up?" that we should all be able to totally agree on, somehow floating in Platonic space without reference to any particular measure of "prices increasing".

The problem is that if you drill down to the question of "what does it mean for prices to be 'going up'?", you must admit to the fact that there are multiple valid definitions of that. It just isn't possible or plausible to create one true definition.

In the presence of that fact, it becomes inevitable that there will be senses in which the price is going up, and senses in which they are not, and senses in which prices are going up more than other senses. That is the reality, which is complicated.

(One propaganda technique is to take one of these numbers, which really exists and is perfectly defensible on its own terms, and then use it in a context in which you know people are generally going to interpret it as one of the other senses of the term. Excitingly, by controlling which "sense" you anchor your listeners to, both "sides" of a debate can push the numbers in whatever direction favors them at the same time.)

According to our nationally-used, generally-accepted metric, if gas is the same price today as it was 365 days ago, inflation is zero. But does that mean the metaphorical person on the street is "lying" if they say prices are generally going up because gas is 20% more expensive than it was three hundred and sixty six days ago? There is a fundamental arbitrariness both to our metrics, and how we all feel about things. I've seen plenty of "How can annual inflation be %8 if my eggs are 2.5x more expensive than this time last year?" posts around lately. The literal answer to that question is obvious, but if someone's expenses involve more eggs than mine, either because their food is a bigger percentage of their home budget or they are a business for whom eggs is a major input cost, they may feel a higher level of inflation than I do, and they're not wrong. They've just got their own inflation metric that disagrees with the national one, but their own metric may well be more relevant to their life than the national one is.

[dcow]

If the last time you looked was last year, then yeah. They went up this year.

What’s misleading about reporting yearly percentage increases in prices? I’m baffled.

[cwilby]

That literally leads to the conclusion that prices rose, in your example.

[rflrob]

The conclusion that “prices rose” is the correct one. What you should not conclude, even though the inflation has been at 20% all year is that “prices are (still) rising”.

[zhte415]

It isn't, yet it is.

The price is still 20% you, and still 0% mom. If reported as inflation still at 20%, does that affect perceptions of inflation, and if so, expectations of inflation? Because expectations of inflation often turn out to be self fulfilling drivers of inflation.

Reported as inflation stable even if it is 20%? Better? Not that 0% is a great target, but that's a separate issue.

[bitshiftfaced]

Even in the early 80s after huge interest rate hikes, YoY CPI inflation stayed above 2% (until the mid 80s).

Rather than modeling it as "the price increases happened in a short period of time and then went back to normal," I think it's more likely that it happened more spread out and persistently, and perhaps still is going on. It's not going to jump to zero after some given month

[fleddr]

Honestly, I'm with those people.

Your explanation is fully technically correct, but the subsequent messaging that inflation is zero is a matter of not reading the room.

When an important item dramatically rises in price, this can have a massive impact on people. A dramatic drop in purchasing power or even businesses needing to close. It is impactful.

When the price continues to be high, the impact remains. The pain continues, the problem is not solved. The politically smart messaging is to say "we feel and acknowledge your continued pain, this is what we're going to do about it", not "Good news! Inflation is 0%."

Same with the opportunistic messaging of sometimes using MoM or YoY, whichever number looks better. When MoM inflation in October is 15% and 5% in November, you really shouldn't bring this as good news. The situation still got worse in the real world.

[lupire]

That's a different issue. "High prices" are a problem, but that's not what "inflation" measures. There is no way to report inflation (derivative of prices) that correctly reports "price/wage ratio", which is what people really care about.

[mattferderer]

How to set inflation expectations - "Inflation shoots up like a rocket & floats down like a feather."

[coding123]

It's bullshit because it's an average of everything that no one buys. My grocery bills have doubled since 2020, meaning my CPI was 100% over 3 years. I will not shut up as you and many others are trying to force me into accept it's 10% inflation.

[sn0wf1re]

The Canadian government provides a personal inflation calculator. You may see higher or lower personal inflation than CPI. https://www150.statcan.gc.ca/n1/pub/71-607-x/71-607-x2020cal...

[0x445442]

Especially when their incomes didn’t double.

[Spooky23]

People who lack foundational skills in math are always vulnerable to being worried about witchcraft and conspiracy.

It’s a major reason why society spends so much on education. Stupid people make poor citizens.

[impulser_]

Don't be surprised when politicians use this to their advantage next year.

[olivermarks]

@matwood it is a disaster for working people regardless as wages are not keeping pace with the effects of inflation.

[KptMarchewa]

Month on month numbers are still slightly up.

[Am4TIfIsER0ppos]

If "inflation is transient" when is it going back to 2/gal?

[howenterprisey]

You're making the same mistake. If inflation is transient, the price _increase_ is transient, but the high prices remain. It would only go back to 2/gal if the high prices themselves were transient. Which I really hope is the case, but IDK.

[elgenie]

“Inflation” means “increase in price levels”. That’s it.

“Inflation is transient” fits prices increasing and then leveling out, and does not imply that every bit of price increase is balanced out one-for-one by immediate deflation afterwards.

As for gas prices, it’s going to depend on supply (including refinery capacity) and demand. The $2/gallon of April 2020 was an artifact of covid nuking demand.

[evancox100]

Transient inflation means the $4 / gallon milk prices stick around and don’t go any higher. Going back down to $2 would be deflation.