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Thread: Consumer spending = inflation?

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  1. #1
    Join Date
    Jan 2007
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    Default Consumer spending = inflation?

    Here's a possibly stupid question:

    Consumer spending has been increasing steadily for the last 7 years despite real wages not rising - netting us several years of negative savings rates.

    In 2000 the rising stock market was touted as the reason, later followed by the theory that home equity was rising, but neither excuse is valid any longer.

    My question is: Given that the apparent inflation rate seems higher than the official rate, how much of consumer spending is simply reflecting 'actual' inflation?

    Some excerpted numbers (from bls.gov, inflation date using calculator)

    Year Overall Spending Food Housing Transportation Official Inflation
    2000 2.0____________2.5__2.2____5.8__________3.361
    2001 3.9____________3.2__5.6____2.9__________2.846
    2002 2.9____________1.0__2.1____1.7__________1.581
    2003 0.3____________1.0__1.1____0.3__________2.279
    2004 6.3____________8.3__3.6____0.3__________2.663
    2005 6.9____________2.6__9.0____7.0__________3.388

    Note that Housing, Transportation, and Food are the 3 largest spending categories - in that order.

    If I weight each of these 3 categories by their share of overall spending and multiply by the increase in the category, the 'FHT' contribution to consumer spending growth looks like:

    Year Overall Spending Food__Housing Transportation Official Inflation 'FHT' Inflation Avg. Gas Price
    2000 $38,045_______$5,158 $12,319 $7,417________3.361________2.182________$1.551
    2001 $39,518_______$5,321 $13,011 $7,644________2.846________2.835________$1.421
    2002 $40,677_______$5,375 $13,283 $7,759________1.581________1.142________$1.397
    2003 $40,817_______$5,340 $13,432 $7,781________2.279________0.550________$1.513
    2004 $43,395_______$5,781 $13,918 $7,801________2.663________2.314________$1.911
    2005 $46,409_______$5,931 $15,167 $8,344________3.388________4.532________$2.290
    2006 $2.981
    2007 $3.146*

    I throw in the average gas price figure for contrast - these numbers are from July of the respective year except for 2007. The 2007 number is for May (latest available from http://tonto.eia.doe.gov/oog/info/gdu/gaspump.html)

    Assuming I am not making some really stupid mistake (it is 5 am my time as I write this), this data would seem to imply that 'FHT' spending was trending down from up to 2003 despite a spike in 2001 (due to real estate liquidity diversion from stock market?), but has been trending up since then.

    More importantly, 2005 shows 'FHT' spending significantly greater than official inflation - more than 1/3 greater!

    Transportation numbers are more or less consistent with average gas price.

    Housing expenditure figures do not reflect housing appreciation until 2005, but the ARM/IO loans could explain that.

    Food shows an inexplicable large jump in 2004, but perhaps gas prices explained that.

    I am very eagerly awaiting the 2006 data...
    Last edited by c1ue; 07-01-07 at 08:41 AM.

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