Food, fuel costs climb, and key inflation measure drops

[flashl]

Federal government traditionally pays little heed to food, energy prices when considering inflation, but that might change

With Americans paying $60 to fill up the car and trading down to burgers instead of steaks, practically everyone is feeling the impact of rising food and energy costs. Soaring prices have put biofuel production under scrutiny, complicated farm bill negotiations in Congress and provoked food riots across the globe. In urging emergency action last week, United Nations Secretary General Ban Ki Moon warned of "widespread hunger, malnutrition and social unrest on an unprecedented scale."

Yet for all those profound concerns, the government reported last week a net drop in the measure of inflation most closely watched by the Federal Reserve, leaving people to wonder how that number can be falling when everything from a tank of gas to hamburger meat is sky-high. In fact, the official view of inflation for years has taken little account of food and energy prices, which are thought to go up and down with no lasting impact.

But evidence is growing that these basics could be elevated for years to come, and the "core" inflation rate—minus food and energy—is telling only part of the story.

"It is reassuring to have the core index tame, but you can't eat on the core index. You can't drive on the core index," said Bill Hummer, chief economist at Wayne Hummer Investments in Chicago. "You can't ignore what's going on in food and energy."

Chicago Tribune

[Jim__]

1. And when we under-estimate inflation ...

we over-estimate production. Remember that when they tell you that GDP grew by 0.6% is the 1st quarter.

[bhikkhu]

2. And we screw those with fixed incomes gauged to inflation

Seniors, mostly.

[LBJDemocrat]

3. Core inflation

is a bullshit propaganda measure, just like the unemployment rate that happens to exclude people who've been unemployed for too long.