Shadowstats CPI calculations

  • Sun, Aug 25, 2013 - 01:25pm

    Peter Squitieri

    Peter Squitieri

    Status Member (Offline)

    Joined: Aug 25 2013

    Posts: 2

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    Shadowstats CPI calculations

I haven't followed Shadowstats much, and I wouldn't pay the money for it,   but I read through his April 8, 2013  'Public Comment on Inflation Measurement and the chained CPI'.   His calculations look to be way off

He compares the usual CPI-U and an internal measure – CPI-U-RS  – calculated as if all the methodological changes since 1980 were in place in 1980.   He derives the year-by-year in the rates,  sums the rate difference, and voila a 5.1% understatement of inflation for the CPU-I

I think column 1 is with Dec 1967 = 100,  but it doesn't make any difference for this purpose.

This summing of year by year rate differences is very suspect.  This what the real calculation looks like.

CPI-U-RS  price level  2011           330.3
CPI-U-RS price level  1980            127.1

Change in price level                       2.5987  (ratio of the two price levels)
average yearly inflation                  3.129%  (the 31st root of 2.5987 converted to %)

CPI-U   price level  2011               224.9
CPI-U   price level  1980                82.4

Change in price level                     2.7294
yearly inflation                               3.292%  

difference in average inflation           .163%

The difference in average inflation between the two methods is .163%,  not his 5.1% .  He's wrong by a factor of 31.

So his most important assertion is the result of a simple error in sophomore high school algebra.  Doesn't look good for the rest of  his comments.