As Reported, Consumer Price Inflation Is Lower Than Expected Once Again


Once again the BLS reports tame inflation and this time with negative revisions.

Consumer Price Index January 2021

This morning the BLS released the CPI Report for January 2021.

  • The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in January on a seasonally adjusted basis.
  • The gasoline index continued to increase, rising 7.4 percent in January and accounted for most of the seasonally adjusted increase in the all items index.
  • The energy index rose 3.5 percent over the month. The food index rose slightly in January, increasing 0.1 percent as an advance in the index for food away from home more than offset a decline in the index for food at home.

  • The index for all items less food and energy was unchanged in January. The indexes for apparel, medical care, shelter, and motor vehicle insurance all  increased over the month. The indexes for recreation, used cars and trucks,  airline fares, and new vehicles all declined in January. 


Not only was the CPI tame, but the BLS revised December from a reported 0.4% to 0.2% month-over-month and the CPI excluding food and energy from 0.1% to 0.0%.


Econoday economists expected 0.2% excluding food and energy. The number came in at 0.0%. Year-over-year, economists expected 1.6% with actuals at 1.4%.

Year-Over-Year Since 1971

CPI Year-Over-Year Percent Change NSA 2021-01 Long Term

Year-Over-Year Numbers

  • Over the last 12 months, the all items index increased 1.4 percent before seasonal adjustment.
  • The index for all items less food and energy also rose 1.4 percent over the last 12 months, a smaller increase than the 1.6-percent rise for the 12 months ending December.
  • The food index rose 3.8 percent over the last 12 months.
  • In contrast to these increases, and despite rising in recent months, the energy index declined 3.6 percent over the last year. 

Fantasy Inflation Numbers

The BLS arrives at these numbers by concluding the cost of shelter fell from 3.1% at the start of the Covid pandemic to a mere 1.6% in January.

The cost of medical care services purportedly fell from 5.3% year-over-year to 2.9%.

Ask anyone who pays for their own medical care insurance if their year-over-year costs look anything like that shown in the long-term chart.

Ask the same question to anyone looking to buy a house.

OK, rent prices dropped in the pandemic because people started working at home and moving out of big cities.

The focus on "consumer" inflation picks this up. And it ignores medical care costs because most people are covered at work or are on Medicare or Medicaid. 

Inflation: How Should We Measure It?

The Fed's focus on CPI vs other measures of inflation is a huge mistake.

 Inflation is booming if one looks at housing prices and the true cost of medical care services regardless of who is paying. 

History also shows it is a serious mistake for the Fed to ignore asset bubbles, and those are part of inflation too, just not the CPI.

For discussion please see Inflation: How Should We Measure It?

The CPI purportedly measures consumer inflation. The problem is "consumer inflation" is a very poor measure of actual "price inflation".

It's inflation that matters, not alleged consumer inflation.

But the Fed, economists, and mainstream media all have their eyes on the CPI. 

Ignoring Inflation

Meanwhile, despite inflation and clear asset bubbles, the Fed says Monetary Policy Will Stay Accommodative For a Very Long Time.

Translated, that means forever or until a global currency crisis changes their tune.


Comments (30)
No. 1-10

It's nice to have the world's reserve currency. Don't ever have to work again.


Let’s send out OJ to look for the missing inflation.


1,4% was in line with the Moore model, and in fact, perhaps a bit above. Judging form the chart, they were predicting 1.3%. Last month the actual number came in above their forecast as well. The real question will be whether they are right about what happens later in the year:


The inflation rate is a fantasy number but the FED has acknowledged that the official unemployment rate is flawed in a speech given today where he said:

After rising to 14.8 percent in April of last year, the published unemployment rate has fallen relatively swiftly, reaching 6.3 percent in January. But published unemployment rates during COVID have dramatically understated the deterioration in the labor market. Most importantly, the pandemic has led to the largest 12-month decline in labor force participation since at least 1948.5 Fear of the virus and the disappearance of employment opportunities in the sectors most affected by it, such as restaurants, hotels, and entertainment venues, have led many to withdraw from the workforce. At the same time, virtual schooling has forced many parents to leave the work force to provide all-day care for their children. All told, nearly 5 million people say the pandemic prevented them from looking for work in January. In addition, the Bureau of Labor Statistics reports that many unemployed individuals have been misclassified as employed. Correcting this misclassification and counting those who have left the labor force since last February as unemployed would boost the unemployment rate to close to 10 percent in January (figure 6).

Perhaps the FED will come clean with the inflation rate and stop insulting our intelligence. 10% unemployment rate is more believable than the 6.3% reported rate.


"Ask anyone who pays for their own medical care insurance if their year-over-year costs look anything like that shown in the long-term chart."
I agree about long term.
But, on the other hand, my wife's Obamacare (Kaiser) went from $723/month in 2020 to $733 in 2021. That is only 1.5%. My Medicare is unchanged.


"The gasoline index continued to increase,"
I don't care. we are down to buying 100 gallons/year. I don't care is gasoline costs $2.60/gal (for premium) or $4.50/gal.
I cannot get excited about $200 possible delta in $100K/year household expenses.


"Ask the same question to anyone looking to buy a house."
But, most of us already own (well, share ownership with the bank) our house.
Changes in house prices are completely irrelevant to our cost of living.


here comes the conspiracies theories...that the govt is manipulating the CPI. please check the Billion prices project by MIT. it closely follows the CPI index


for reasons discussed ad nauseum, the cpi is designed to filter out price increases and doesn't reflect anyone's cost of living. Certainly not mine.

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