Local Economist Questions Official Inflation Figures

April 25, 2016|
Inflation

Inflation

Simon Medcalfe, associate professor of finance at Augusta University Hull College of Business, believes that official inflation figures (currently 0.9 percent for March) may not fully capture changes in the general level of prices.

The Bureau of Labor Statistics collects prices by personal visits or telephones calls each month in 87 urban areas across the country from about 6,000 housing units and approximately 24,000 retail establishments-department stores, supermarkets, hospitals, filling stations, and other types of stores and service establishments.

This approach clearly misses the increasing use of online shopping. A new “digital price index” developed by Adobe covers three quarters of online shopping at America’s top 500 retailers and tracks 1.4 million goods. It shows, for example, that the online price of computers fell 13.1 percent relative to the 7.1 percent decline seen in the official inflation figures.

Although the digital price index does not include spending in traditional outlets it does suggest that prices may not be rising as fast as official figures suggest.

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