7. What goods and services does the CPI cover? The CPI represents all goods and services purchased for consumption by the reference population (U or W) BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups. Major groups and examples of categories in each are as follows: * FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, service meals and snacks) * HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture) * APPAREL (men's shirts and sweaters, women's dresses, jewelry) * TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance) * MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services) * RECREATION (televisions, pets and pet products, sports equipment, admissions); * EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories); * OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses). Also included within these major groups are various government-charged user fees, such as water and sewerage charges, auto registration fees, and vehicle tolls. In addition, the CPI includes taxes (such as sales and excise taxes) that are directly associated with the prices of specific goods and services. However, the CPI excludes taxes (such as income and Social Security taxes) not directly associated with the purchase of consumer goods and services. The CPI does not include investment items, such as stocks, bonds, real estate, and life insurance. (These items relate to savings and not to day-to-day consumption expenses.) For each of the more than 200 item categories, using scientific statistical procedures, the Bureau has chosen samples of several hundred specific items within selected business establishments frequented by consumers to represent the thousands of varieties available in the marketplace. For example, in a given supermarket, the Bureau may choose a plastic bag of golden delicious apples, U.S. extra fancy grade, weighing 4.4 pounds to represent the Apples category. 8. How are CPI prices collected and reviewed? Each month, BLS data collectors called economic assistants visit or call thousands of retail stores, service establishments, rental units, and doctors' offices, all over the United States to obtain information on the prices of the thousands of items used to track and measure price changes in the CPI. These economic assistants record the prices of about 80,000 items each month representing a scientifically selected sample of the prices paid by consumers for the goods and services purchased. During each call or visit, the economic assistant collects price data on a specific good or service that was precisely defined during an earlier visit. If the selected item is available, the economic assistant records its price. If the selected item is no longer available, or if there have been changes in the quality or quantity (for example, eggs sold in packages of 8 when they previously had been sold by the dozen) of the good or service since the last time prices had been collected, the economic assistant selects a new item or records the quality change in the current item. The recorded information is sent to the national office of BLS where commodity specialists who have detailed knowledge about the particular goods or services priced review the data. These specialists check the data for accuracy and consistency and make any necessary corrections or adjustments which can range from an adjustment for a change in the size or quantity of a packaged item to more complex adjustments based upon statistical analysis of the value of an item's features or quality. Thus, the commodity specialists strive to prevent changes in the quality of items from affecting the CPI's measurement of price change. 9. How is the CPI calculated? The CPI is a product of a series of interrelated samples. First, using data from the 1990 Census of Population, BLS selected the urban areas from which data on prices were collected and chose the housing units within each area that were eligible for use in the shelter component of the CPI. The Census of Population also provided data on the number of consumers represented by each area selected as a CPI price collection area. Next, another sample (of about 16,800 families each year) served as the basis for a Point-of-Purchase Survey that identified the places where households purchase various types of goods and services. More : http://www.bls.gov/cpi/cpiadd.htm#9_1 # Traditionally, the CPI was considered an upper bound on a cost-of-living index in that the CPI did not reflect the changes in buying or consumption patterns that consumers would make to adjust to relative price changes. The ability to substitute means that the increase in the cost to consumers of maintaining their level of well-being tends to be somewhat less than the increase in the cost of the mix of goods and services they previously purchased. Since January 1999, a geometric mean formula has been used to calculate most basic indexes within the CPI; in other words, the prices within most item categories (for example, apples) are averaged with the use of a geometric mean formula. This improvement moves the CPI somewhat closer to a cost-of-living measure, because the geometric mean formula allows for a modest amount of consumer substitution as relative prices within item categories change. Because the geometric mean formula is used only to average prices within item categories, it does not account for consumer substitution taking place between item categories. For example, if the price of pork increases relative to the prices of other meats, shoppers might shift their purchases away from pork to beef, poultry, or fish. The traditional CPI formula did not reflect this type of consumer response to changing relative prices. In 2002, as a complement to the CPI-U and CPI-W, the Bureau produced a new index called the Chained CPI-U (C-CPI-U). The C-CPI-U was created to more closely approximate a cost-of-living index by reflecting substitution among item categories. It is unlikely, however, that the difficult problems of defining living standards and measuring changes in the cost of their attainment over time will ever be resolved completely. It is important to note that area CPIs cannot be used to compare levels of living costs or prices across areas. (See answer to Question 18: "Can the CPIs for individual areas be used to compare living costs among areas?")
"How Dumb are T-Bond Investors?" I would say that most T-Bond investors are not dumb at all. I would suggest to you that anyone that does invest in T-Bonds, has enough assets not to be overly concerned about the rate of return. Some people are never satisfied. But if I have more assets than I will ever spend in my lifetime, what does it matter. The only thing that will happen besides me sleeping well at night and not worrying about where my income is going to come from tomorrow will be that my children will not inherit as much money if I invested those assets more aggressively. However, they will receive more of those assets than I have now and never less as they don't "lose" money. Joe.
yes, very curious, too. But I think it still might take another couple weeks until a bond short will make sense again (except for some minor corrections).
let's look at the results of the old calculations and the current bullshit... conveniently. the CPI gets understated from what was accepted pre Clinton era math..... too much of a coincidence and the fact that GDP gets overstated as a result of price deflators being too low... bottom line is the gov. didnt like the results using the old method so just change it.... t-bond investors that hold until maturity are fairly stupid http://www.shadowstats.com/cgi-bin/sgs?
Do you ever go and shop? Everything is up dramatically: food, clothes, gas, utilities, gas and the list goes on indefinitely. The only thing that i can constantly see getting cheaper is electronics. But how often you buy new tv vs groceries and clothing for example. I have no idea how governmbet calculates CPI by my inflation is currently running around 10%.