Who says we do?

Often it’s measured with CPI, which measures the price of a pre-set collection of goods and services, representing what an average individual may spend on.

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I was reading a NYT article and often times on the graphs they have inflation separated from inflation on things like food and energy.

If you combined the two inflation would be something like 12%

But they only have it as 6%.

Here is a longish article that explains your question and why certain items are sometimes removed. Basically there are some items that are more volatile and can mask other issues. In many cases, supplementary data is also available that tracks the excluded items and this gives economists a better idea of what are the underlying trends and account for the more price volatile items later.

https://www.forbes.com/sites/qai/2023/01/23/supercore-inflation-excludes-food-energy-and-housing/?sh=31aaee353328

But wouldn’t things like food and the cost of energy be critical to calculating total inflation?

These are items that we simply cannot go without. I understand they’re volatile but at the same time people need to eat no matter what. They can stop buying television, they can’t stop buying loaves of bread. Either way I’ll check out the article. Thank you!

In regards to real estate, it's because the average person stays in a home they purchased somewhere around 10 years before buying another and moving. Although the value of a person's house obviously affects their bottom line, people can easily live through an inflation increase and decrease cycle without ever having to deal with the real estate market. Locked in interest rates can easily avoid the cycle as well. Stuff like the prices of groceries, gas etc are felt by everyone constantly and are a better measure of what people are dealing with in regards to inflation.

So in terms of placing an accurate number on inflation as felt by the consumer its best to look at the price of groceries, energy etc?

I see your point on housing.

They are talking about “core” inflation.

The truth is that they report both! And they report dozens of splits of price data as well.

Central banks often like core inflation because food and energy prices can be very volatile and susceptible to changes in commodity prices that are not dependent the current state of the economy. Do they need to raise interest rates to slow the economy and bring down inflation is the main source of higher prices is due to OPEC or some drought? They get better data if the more volatile components are subtracted out.

But total inflation still gets the biggest headlines on news reports. If food or energy inflation persistently beats total inflation for long periods of time, there will be pressure to address that in other ways (oil reserves, trade, etc). But it’s still unlikely that the Fed will feel like they should slow the economy to fight it like they would if there was high core inflation.

Generally they look at both and publish both

Food and Energy are generally impacted by different factors than consumer goods, but a spike in one of those two could mask the behavior in consumer goods so most inflation charts actually look at 4 things

All items

Food

Energy

All items not including food and energy

If food costs start to climb 9.5% due to a specific set of circumstances but the rest of things are only growing at 5.5% then how much is inflation impacting people? It depends what percentage of their budget is food. The standard weighting for "All items" has inflation at 6% but that really masks the impact that high food costs have on lower incomes and the less significant impact they have on higher incomes.

Its also important to track energy separate because energy costs feed into other goods. If electricity costs increase 10% then that cost gets passed forward in the cost of other products since they now cost more to make so its important to be able to see it as both an input cost and as an end impact on the prices

That's a reason why real estate may be excluded. All this stuff is tracked however, and things like food and energy may or may not be included in certain numbers as well. Energy can be affected by things like wars, natural and unnatural disasters and shutdowns, while food is subject to extreme weather, diseases, fuel costs etc. However you want to count it though, all these things either directly or indirectly affect the cost of everything else eventually.

The things affecting a family of 5 and the things affecting someone running a business are very different, so various tracking methods and numbers are used.

We generally don't, but some measures of inflation are useful under certain circumstances for measuring things which don't have a seasonal fluctuation like food. If a particular crop has recently been harvested the price for that food will drop, but that isn't really significant to a general measure of inflation.

They report both.

In the case of Food/Energy, they're often very volatile, so sometimes it's useful to subtract them out. Basically, they're very 'noisy'- you'll have big jumps up and down depending on supply/demand, but that can obscure the actual trend. For example, you might have a spike in energy prices one month because a bunch of oil rigs were down, but they'll be back up and running next month. So it doesn't necessarily tell you anything useful to include that one month spike. When you subtract off Food/Energy, this is "core" CPI. But there is also 'normal' CPI which does include Food/Energy.

In the case of housing, those are considered assets. CPI measures consumption. They do include the 'consumption' part of housing, basically measuring what you would've paid in rent. So they try to basically split the consumption part (which is counted) from the asset part (not counted)

I think you're falling into the old trap of hoping for a single metric to perfectly sum up a complex situation. As is often the case, no single number does that. The price changes of everything get tracked and analyzed and used for various purposes. Looking at different areas separately can tell you different things. You can go look up how houses, food, and gas prices have changed - nobody is concealing this information from you. But if you want a number that perfectly summarizes inflation, you're simply looking for something that does not and can not exist. Inflation is complex and happens for different things at different rates.

So, yeah, some metrics exclude some things so that they can better see the other things. That doesn't mean that the excluded things don't matter, it means that whatever metric you're looking at just doesn't include those things. If you want to see an inflation rate including those things, look at an index that includes them.

They exclude food and energy because they are volatile and can be affected by many different things that don't give a clear picture if the underlying trend.

Housing is excluded because they way they calculate housing is moronic and is a terrible measure. Housing is calculated with what is called "Owners equivalent rent." Basically, they survey home owners and ask, I'd you were to rent out your house, what would you charge. People answering a survey unprepared will not give a good answer for that, so the number is a terrible one to consider.

Because the government never wants to look bad.

Statistics are often manipulated to make things look better or worse than they actually are. The Federal government is especially good at this.

Sometimes it is also just complicated as hell to ascribe a number to something.

There is almost always more to the story than any 1 number that describes something like "Inflation".

We don't. All those items are included in CPI. The basic premise of your question is wrong.

If you look at food and energy over long periods, they work nicely.

The catch is look at something like eggs in the last few months. Was the doubling of egg prices evidence that prices across the board were going up, or was it an anomaly that corrected quickly? We'd be foolish to think that we were looking at an at large inflationary trend when they went up, or conversely, that there was a deflationary trend at large when they came back down.

CPI shows all categories that consumers spend money on. You can exclude whatever parts you want to exclude for whatever reason. But it's all in there as a starting point. You can look at actual CPI reports for free you know..

Yes but that makes it possible to appease people with lower sounding numbers(even tho they now don't really mean anything anymore) and that's something interesting to the ruling

They fluctuate, affect people differently (e.g. people who live in social housing, or own their home outright, aren't affected much by housing costs as they're largely insulated from them) and measure different things. Housing, particularly bounces around like a looney disproportionately to everything else and yet if you're retired or don't have a mortgage, it might not affect you whatsoever.

In the UK, the government publish CPI (general consumer prices), CPIH (consumer prices including housing costs) and RPI (retail prices of a bunch of selected items) for this reason.

https://www.ons.gov.uk/economy/inflationandpriceindices

Anyone with a brain should pick a point at which they knew their salary, and plot their salary against the various indices to see how much they should be pitching for at their next pay review.

(A quick and dirty way:

Say you were earning £10,000 in Feb 2022 when the CPIH was 109.4 and want to know what you should be earning in Feb 2023 when the CPIH is 126.

https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/l522/mm23

Divide 10,000 by 109.4, multiply by 126. You should be earning £11,517 now - JUST TO BREAK EVEN. Anything less than that and you've taken a paycut in the last two years, because everything else got more expensive.)

So politicians can brag about how great things are when they are not and so companies can say inflation is low when it is not so they don't have to give big raises. This is an honest and accurate response. I think we all know and realize those three items should be included because they make up the majority of most people monthly budget.