The Indicator from Planet Money - How Do You Measure Inflation?

The Consumer Price Index helps to understand prices and inflation, but where do the numbers come from in the first place? We tagged along with an economist to find out the prices of socks, butter, and daycare.

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Inflation. It is a huge concern about the economy right now. Inflation is just a fancy name for prices going up. And if prices are going up, Eddie really fast pace, it can signal the beginning of a so-called inflationary spiral, that means prices going up out of control. So, like your latte goes from $4, to $10 to $50. That can cause enormous destruction to an economy. And, of course, to the savings of millions. And millions of people, it's one of the most important indicators for any economy, its measured using something called the Consumer Price Index CPI. It's a measure of the price of everything we buy and it just came out today. And it's kind of the rate of inflation as of the beginning of June was 5.4%. Meeting consumer prices were up 5.4% in May compared to the year before that.

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What's the fastest prices have risen since 2008 for Economist for quick to point out that June of last year was a really brutal time for the economy. So prices might have been a little bit lower than normal but the CBI has lot of people worried and in wondering how policy will be affected by this news, but how did we come to get this news? Actually, how is that number measure that 5.4%? Where does it come from? The process is meticulous labor-intensive and it involves hundreds of people. Feel the top secret. This data is closely guarded because it needs to be above suspicion and tampering. But the Bureau of Labor Statistics agreed to let us tag along for half a day but totally worth it. We got into the belly of the Beast, the inflation machine.

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This is the indicator from Planet Money on Darren woods today, on the show the inflation Watchers, we go under the hood of the CPI, and see how the government determines whether inflation is happening.

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To get the inflation number every month. Millions of data points are involved, get it by around 450 dedicated workers rights Department of Labor Bureau of Labor Statistics, every month, Emily and her colleagues. Go on a hunt, a hunt for insulation to do this. They tracked, the price of just about everything went haircuts, trucks, toasters, raincoats boxes of weinberger's to go weddings, funerals yoga pants. And my favorite saying is, we follow prices on pretty much everything that is legal in the country. This is a huge job and it starts with surveys taken by thousands of households just Everyday People all across the country who write down in really minutest detail, how they spend their money.

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And then inflation Watchers like Emily will find, you know, a particular brand of butter at a particular store and they will track the price of it for years. Everything has a code salted butter, has one card, unsalted butter has a different code butter in sticks, different code, organic butter. That's all so different. And this is true for every consumer product in the US 600-page manual for a reason.

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600 Pages. If there is a lot, I have really everything. There is a lot to learn. I have to check these prices trackers like Emily used to drive around just or find a particular tub of unsalted butter or a 100% wool, boatneck sweater in size 8. And look at the price tag for that particular item. And then come back to that store to look at that same item month after month, which I'm really kind of old school and needlessly labor-intensive. But this data is just that important. It has to be accurate cost curve. It changed. Everything in person was no longer an option. So now instead of walking into stores and chicken price tags. Now, Emily save is a lot of this.

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This is Emily mastitis. Calling with the Bureau of Labor Statistics, how you doing today? Add a sporting good store in Delaware, Consumer Price Index, update on our pair of socks socks. Of course. I cannot reveal the brand of socks because I signed a non-disclosure agreement and it's confidential but these are white athletic socks of course they are not just any white athletic socks though verifying some specifics on the item gets knee-length is that correct and then I have that it is 85% acrylic and 15% nylon. Okay great and I have that has moisture wicking is that correct? Emily makes a note of all of this she gets to the right code and now the moment is here the price for the socks.

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Price hasn't changed since last month. So the stock indicator Darien telling US, inflation isn't happening, but that was just one product in one store. Can you cannot measure inflation? Using just one pair of socks and Emily has at least 30 more price. Checks ahead of her today. Products like socks. The Consumer Price Index tracks services to haircuts Powerpuff, workout classes daycare. In this case, the weekly rate for a 2 year old at a daycare in Philadelphia Emily, check the price on the website, she does a lot of that these days. Do I have older toddler here and the weekly full-time tuition is $320 - $306 though, inflation and action inflation in action. The price of daycare is up 5% at $14, a week and that adds up to $700 a year.

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Of the dreaded inflation as you can imagine. During I got very worked up about this. I was like, here it is.

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And Emily was like, okay, like let's look at a few more prizes. Let's make some more calls. So she let me tag along to a couple more phone calls including to a little corner store in Philadelphia to check the price of butter is butter. It's not that exciting. We will be the judge of that I am just calling to do our monthly check on butter for the Consumer Price Index specifically a box of four sticks and salted 435

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Yes Man. Okay, so that's going up 25%. It looks like the last time it was 349 G. Do you happen to know why it's increased so much? See what are these? Exciting. But Emily gets very focused here because this is potentially a really big moment in the inflation hunt price Rising by that. Much actually requires filling out a special form. I mean, it could be evidence of spiralling inflation has been doing this for years and Spidey senses going off. So before she fills out that special form, she asked the store on it to double-check the price of that photo. The store owner, puts the phone down to wait for a minute comes back on, okay, so it's not 4:30 5:00 right now. She was looking at the wrong brand of butter. In a particular butter Emily's, been tracking is part of a promotion this week 2 for $5. So one package cost 250, which is actually less than it costs last month.

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Others are really does a huge increase for butter on it. I'm glad you took the time to look. That up for me, I appreciate it. This is why it's so important to be, so precise, all of the Details Matter, that's 5.4%, inflation rate. We saw this morning that push markets down that has policymakers issuing statements and the price of gold Rising. That number comes down to this a woman, calling a supermarket in Philadelphia to check the price of butter and then double checking to make sure the data is right.

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This episode of the indicator was produced by Julia. Ritchie with help from Gilly Moon, it was fact-checked by Michael hot, the indicators edited by Kate, concannon and is a production of NPR.

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Hey, my name is Michael and the current Internet indicator, we're looking for an intern, this fall and winter. It will be a joint internship with Planet Money. If you're interested in work, like fact-checking pitching technical production. Please reach out to us. Visit npr.org internship npr.org internships.
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