Consumer Prices Go Higher
February 21st, 2008 by Harvey ShapiroThe Consumer Price Index (CPI) for Honolulu was announced today and, as expected, it was quite a bit higher. Overall, the CPI grew by 4.8% and the housing component rose by 7.2%, which was a higher growth rate than we’ve seen in a number of years.
But take this information with a grain of salt . Sure our costs are higher, but this index measures costs for a basket of goods which most consumers probably didn’t buy. Buying patterns are region-specific and the CPI doesn’t take into account Hawai`i’s penchant for Spam, as an example. There is also a substantial time lag in the data.
More to the point, the housing component measures the inflation in housing costs, but this assumes that everyone buys (actually rents) a new house each year and the overwhelming percentage of residents did not. A typical Honolulu consumer has non-variable costs associated with housing that don’t vary from year-to-year. Fixed-rate mortgage payments are a good example of a cost that doesn’t change.
Not to say that following the CPI isn’t valuable, but I don’t believe that it is a particularly good measure of your financial health.
Any thoughts on the CPI?
February 23rd, 2008 at 10:32 am
Economies wax and wane.
There is an increasing population of people (retiring baby boomers and other mobile types) in the world that will migrate to wherever conditions are most favorable at any given time.
So when there is an increasing perception that the cost of living is growing out of control and nobody should have to put up with it, the most adaptable move to those communities begging for people to move there and doing everything they can to make life attractive — rather than advising people to visit and bring lots of cash to leave here, but informing them they are not welcome to stay.
That’s where the action is, and the new frontier for those willing to move to them. That was even true for Hawaii in the ’90s, when the US dollar was strong yet people around the world shunned living here because of the previous hpyerinflation. You couldn’t get people to move here — and they were begging for people to return.
But alas, Island culture and personalities, do not handle success well and find a way to undermine it so we’re back where we started at — only worse. Life in such places is the familiar vicious cycle — of higher prices fueled by higher wages and higher demands for endlessly more.
Meanwhile, there are many attractive alternatives that were not so under different conditions and times — that become attractive with shifting economic fortunes. Right now, the dollar is low relative to all the other currencies in the world. That impact is greatest to most in the price of oil, which is always adjusting, and as such, a valuable piece of information rather than one that should be “fixed.”
In a previous time, when writers (economists) wrote of the CPI, they’d add on another adjustment on top of the adjustment and so these figures meant absolutely nothing but what such demagogues wanted us to believe.
I congratulate you on your restraint in this discussion.
February 24th, 2008 at 12:03 pm
regarding the Advertiser’s article on increases to home , electric , etc
how can they state an only 4+% HECO increase
(yeah maybe in someone’s dream) when in reality it’s more like a 48-50% increase in a year’s period ?? or a 6-9% per day and rising increase month after month.
March 1st, 2008 at 12:26 am