The CPI and The Dollar

cropped-bob-shapiro.jpg   By Bob Shapiro

The Year-Over-Year rise in the official CPI has turned negative, while the ShadowStats versions, using the BLS calculation methodologies used in 1990 and 1980, still show positive if lowered price increase rates. The 1990 methodology shows prices 3 1/2 % higher than a year earlier, down from a 5 1/2 % rise last year from the previous 12 months. The 1980 methodology shows a slowing of consumer price hikes to about 5% (YOY) compared to the previous year’s 10% (YOY) rate.

The US Government continues to spend far beyond its means, continuing to run the official National Debt well past $18 Trillion, while maintaining the Zero Interest Rate Policy (ZIRP). Both of these should be huge forces weighing down the value of the US Dollar in international FOREX markets. However, turmoil in many other countries has overwhelmed the Dollar negatives, and the Greenback has surged about 25% during the last 8 months.

US Dollar 111614

It is this parabolic upmove in the Dollar, which has lowered import prices (more competition for domestic producers), that has caused the CPI and ShadowStats alternative charts to turn downward. The greater price competition, while very good for US consumers, also means that business profits are taking a hit, causing increased layoffs. The fairy-tale official unemployment numbers don’t show it as yet, but that will change very quickly.

I’ve copied for you what has to say about the CPI numbers, and I recommend that you look at their site for other alternate calculations, for example on GDP and Unemployment.


Alternate Inflation Charts

The CPI chart on our home page reflects our estimate of inflation for today as if it were calculated the same way it was in 1990. The CPI on the Alternate Data Series tab here reflects the CPI as if it were calculated using the methodologies in place in 1980. In general terms, methodological shifts in government reporting have depressed reported inflation, moving the concept of the CPI away from being a measure of the cost of living needed to maintain a constant standard of living.

CPI Jan '15 - 1980

(Charts Courtesy of

Further definition is provided in our  CPI Glossary. Further background on the SGS-Alternate CPI series is available in our Public Comment on Inflation Measurement.

CPI Year-to-Year Growth – Last Updated: February 26th, 2015

The CPI-U (consumer price index) is the broadest measure of consumer price inflation for goods and services published by the Bureau of Labor Statistics (BLS).

While the headline number usually is the seasonally-adjusted month-to-month change, the formal CPI is reported on a not-seasonally-adjusted basis, with annual inflation measured in terms of year-to-year percent change in the price index.

In the charts above we show two SGS-Alternate CPI estimates: One based on the pre-1990 official methodology for computing the CPI-U, and the other based on the methodology which was employed prior to 1980.

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