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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: mishedlo who wrote (1067)	9/26/2003 11:28:15 AM
From: Jim Willie CB	of 110194

FED STATS MISS HALF THE RECENT PRICE INCREASE By JOHN CRUDELE (New York Post) September 25, 2003 -- WASHINGTON got it half right. In the consumer inflation report released by the feds last week, the government picked up only about half of the recent 15 percent increase in gasoline prices. The big question now is: Will the rest of the gas hike be captured in the September consumer price index, or will it just disappear in the statistical grinder? If it is picked up, the government will risk giving Social Security recipients a decent cost-of-living hike next year. Social Security benefit increases are based on the three-month average overall rise in consumer prices for city wage earnings and clerical workers - the CPI-W, as the government calls it. So far, the CPI-W had a 2.0 percent annual increase in July and 2.1 percent increase in August. Social Security hikes were just 1.4 percent last year. A couple of other facts that the financial markets might find interesting or disturbing: * Without the use of geometric weighting - i.e., the theory that consumers will switch to burgers when steak gets too expensive - the annual inflation rate during August probably would have been 4.7 percent, more than twice the reported number. That's not what the markets want to hear. Most other reporters toed the party line that - if you exclude energy and food - costs showed the smallest 12-month increase since 1966. If only we could exclude food and energy costs from our family budgets. * Real earnings in August declined 0.3 percent, meaning that even though the government says inflation is low people still aren't keeping up. That's the second drop in five months. * All of the government's numbers, of course, are adjusted for seasonality. Which makes this sentence in the government CPI report all the more interesting: "The unadjusted data are of primary interest to consumers concerned about the prices they actually pay," the report says (my emphasis). Washington may finally be getting the idea that people don't like a heavy dose of razzmatazz with their economic numbers. nypost.com

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