The October Consumer Price Index (CPI) was released today at 8:30 AM EST at the same time as the MARTS retail report. Retail sales have increased year to date by over 4%. We have seen inflation in Shelter costs and medical costs more months and years. The unadjusted CPI_U data shows that all-items less food and energy is ticking slightly higher to 1.8% (officially.) The problem is that the weighting of the basket of goods has changed from last October.

The bifurcation of inflation pressures continues. We have seen deflation in home furnishing costs, apparel costs, transportation commodities, and recreation commodities, We have seen upward pressure on prices for Medical care commodities, medical care services, Hospital and related services, Health insurance, Transportation services, Recreation services, and Personal Care Services. If it is a commodity, deflation, if it is a service, inflation. Shelter Costs are also higher by over 3%. Rent and "rent equivalent" costs are both higher this year than last year.

Once again, weighting is masking the true rate of inflation. If you had $4000 of disposable income how would you spend it? Most months the combination of the relative factor data comes to 100%. This is how it should work. During 2015 it added up to $99.17. If the inflation values used in the category data is applied as it was last year, that is if the same basket of goods were bought this year as were bought last year then you would have spent $4080 this year of your $4000 budget. If we are what we eat then we are eating less this yea, at least according to the weighting. The problem is that, according to the MARTS data, we are spending more money at Food and Beverage stores and at Food and Drinking Establishments.Energy costs are up by 6.4% over last October.

The take-away her is that inflation is under control, close to 2%, because we are simultaneously experiencing inflation and deflation. Health costs are taking a bigger bite out of our budgets than  they did during 2016 and 2015. Something to note is that the graph used i the report that is at the top of this column is a "non-zero" base for the rate of inflation. This makes it appear as though there is no inflation. This was not the same as last October.

It's the economy.