Economy

substitution is fully included. So, for example, if because of high beef prices, people switch to turkey necks and other lower-priced kinds of meat, and just plain eat less meat, this shows up in chained type indexes as a slowing of meat price increases or even a reduction in meat prices. That's why I hate the PCE (known as the "pissy" ) and, instead feature the CPI (the "sippy" ) which has lot less of substitution effects.

I suspect the PCE is the Fed's favorite inflation gauge because it's generally lower than the CPI, and therefore easier to hit the 2% target with it.

Just so people know what's behind all the media bubbly boo about the PCE being the Fed's preferred index.

Another thing to watch out for is the way super-over-emphasis on a 12-month figure (aka "year-over-year", "past year" ), which is full of old data, more than half more than 6 months old. That's fine, for history-loving types.

Also to be noted is that if the latest month-over-month increase is greater than the month-over-month increase from 13 months ago that drops out of the 12-month window, then the 12 month figure increases. Otherwise it decreases. The number leaving the window is just as important as the number entering the window. So when the media bubbly boos about the 12 month figure going up (or down), realize that is all that it boils down to - a comparison of the most recent one-month increase with the one-month increase from 13 months ago.

I prefer to know what recent and current inflation is doing. I prefer the 3 month average for that, annualized (just like they do for GDP).

Here's the rest of the harangue as well as the most recent CPI graphs
https://www.democraticunderground.com/?com=view_post&forum=1002&pid=20666711