News

Another look at consumer prices

Higher prices and harsh words for the CPI from the Chapwood Index

BY HBSDealer Staff

Prices in the top 50 markets in the U.S. rose an average of 9.6 percent on an annualized basis in the first half of 2019 versus the same period in 2018, according to the Chapwood Index, described as an alternative to the U.S. Consumer Price Index.

This is in stark contrast to the CPI, which tracked a 1.7 percent increase over the past 12 months.

According to the Chapwood Index, prices of the 500 most purchased items in each of the 50 largest cities in the U.S. rose most in California, with Los Angeles and San Jose leading the list at 12.6 percent. Prices increased least in Mesa, Arizona at 5.5 percent.

“Since the early 1980s, the Consumer Price Index, which excludes items such as food and fuel from its baseline numbers, has been used to measure inflation,” said Ed Butowsky, whose firm Chapwood Investments devised the Chapwood Index. “It is easy to see that the CPI was created to extend the life of the Social Security system while punishing a huge number of citizens,” he said. The CPI, whose formula changes nearly every year, saved the government nearly $700 billion over a 10-year period.

“The shame is that the CPI is used to calculate Cost of Living Adjustments (COLAs) that guide annual increase in salaries in the private sector and Social Security payouts,” said Butowsky. As a result, consumers’ purchasing power is falling each year. The Social Security COLA for 2019 increased just 2.8 percent.

It is also used by a number of other industries to set pay. The issue is one of going one step forward and two steps back. For instance, if you live in Los Angeles and make $80,000 per year, you would need an $8,480 raise/cost of living adjustment just to keep pace with inflation, according to the Dallas-based company.

“The CPI is a bogus measurement that does not reflect reality,” Butowsky concluded. “That’s why we created the Chapwood Index.”

Examples of items included in the Index: Starbucks coffee, Advil, gasoline, taxes, tolls, fast food restaurants, computer paper, toothpaste, oil changes, car washes, pizza, Internet service, Gymboree lessons, mobile phone service, cable TV, dry cleaning, movie tickets, hairspray, gym memberships, home repairs, piano lessons, laundry detergent, light bulbs, school supplies, parking meters, pet food, underwear and People magazine.

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

TRENDING STORIES

POLLS

What area of your business is next in line to receive new investment or new resources?
  • Add your answer