I like to keep an eye on independent inflation gauges since I know there’s a great deal of skepticism regarding the government data.  I even created my own index that I track since I don’t think the government’s tracking of inflation is quite accurate (though I know the inclusion of housing (investment) is not technically accurate from an economist’s perspective).

So what are the independent gauges telling us?   They’re saying the same thing the BLS data is – inflation is still very low by historical standards.   I’ve attached the latest readings from several independent gauges:

The Billion Prices Project shows inflation just above 2%:

The ECRI’s Future Inflation Gauge is actually DOWN 1.6% versus last year:

My Housing Adjusted CPI shows inflation at 1.3%:

And even Shadows Stats is showing a decline in the rate of inflation although they’re showing much higher levels than any of the other metrics:

None of this is terribly surprising given the stagnant economy. I’ve been fending off hyperinflationistas and even high inflationistas for years trying to explain that QE doesn’t cause inflation and that the government spending is just barely enough to offset the continued weakness due to the debt bubble.   This morning’s BLS report confirmed that the economy remains in a muddle through environment and with this sort of slack in the economy and general lack of demand we should see continued low rates of inflation.   The risk to this outlook is a big change in government spending, substantial rate of change in private investment and consumption (likely debt fueled) or a supply shock most likely in the form of Middle East tensions.   I’d say the baseline scenario in the coming years is for continued low inflation….



Got a comment or question about this post? Feel free to use the Ask Cullen section, leave a comment in the forum or send me a message on Twitter.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • perpetual neophyte

    Thanks for putting these together here; these kinds of “round ups” are valuable because they save me that most precious of resources: time. :)

  • Mr. Market

    When I look at the chart of Shadowstats then see clearly the impact of the two QEs. Because QE was a boost for speculation in a number of commodities. Of course, other components are also contributing to higher overall inflation.

    It seems Congress wants to push the reported/official inflation down even more.
    It results/will result in lower interest rates. “”Congress imposing more austerity”” anyone ?

  • Jay

    Great post…thanks, Cullen!

  • Johnny Evers

    If we were to see hyperinflation, what would we expect to see these charts look like?
    If hyperinflation is a sharp, sudden, dramatic rise in inflation then wouldn’t these charts showing that everyhing is fine be irrelevant. I’m not a hyperinflation bug (although it is certainly one possible outcome) but charts showing that inflation is under control wouldn’t necessarily indicate that hyperinflation is not a threat.
    After all the turkey’s chart in the weeks before Thanksgiving show him to be just fine.

  • whatisgoingon

    Why is the ECB so hawkish on inflation and resisting interest rates drops even with a weak economy while the Fed is more relaxed in terms of promising low rates until 2014?

    Is this about the ECB trying to instill confidence and demand for the Euro and its member state debt? Or are they clueless on inflation?

  • lsa420

    And this whole time I thought the dollar would have collapsed by now….

  • Inglorious Investor


    The Billion Prices Project tracks prices for goods/serves from online retailers. The two guys who run the project admit they do not track 100% of the CPI. This index is really a subset of the economy. It’s certainly interesting in its own way, but it’s even more flawed than the CPI itself. So, they are showing a slightly higher than 2% rate. But according to them, CPI is almost 3%.

    The ECRI Future Inflation Guage is a measure of inflation pressure or expectations, not inflation itself. So, the 1.6% decrease is not a reading of inflation. But, apparently the index is down. Global economy slowing. No surprise.

    What’s your housing adjusted CPI measure? I’m guessing it includes housing? At what weight?

    Shadow Stats at 6%.

    One way to look at inflation is this: Energy is the universal fundamental input for the economy (and the universe). Therefore, a good way to judge inflation (measured as the purchasing power of money) is by looking at energy prices. If energy prices are rising faster than incomes, that will make just about all goods and services more expensive, not just your drive to work. Petroleum prices have just about doubled over the last 6 years or so. That’s pretty darn serious. However, other things, like nat gas and housing (in the US) have collapsed. Note, however, that deflation in housing has been bad for most, because deflation and debt do not play well together.

    We are not seeing general, high inflation across all sectors of the economy. There are multi-varied forces at work (monetary policy, government spending, technology, demand destruction/increases etc, austerity, imbalances, etc). For example, if we are at the end of the era of cheap oil, I don’t foresee oil prices rising steadily. Rather, because supplies will be tight under this scenario, extreme volatility may be the norm. We could see more spikes and collapses. This could also apply to the economy at large as all of the competing global forces clash. Volatility is to be expected during periods of transition.

    Therefore, it could very well be that inflation, as we have come to understand it, no longer applies, at least for now.

  • Anonymous

    Maybe the Federal reserve should target a deflation rate.

  • Andrew P

    The dollar won’t nosedive until oil supplies hit a terminal decline. Given that China and Europe are slowing and reducing their fuel consumption, it is likely to be at least several years before oil supplies nosedive.

  • AWF

    Well CR you are getting a slight bit better on Inflation–though I could hardly notice.

    As any “Housewife/Homemaker” will tell you–There is noticeable downsizing on quantity/quality of “Goods” at the grocery store.

    Getting less and paying the same/more on a wkly basis!

    While this change is not accounted for in “official Inflation”

    It ties in with your “deflation theme” on everthing else that is counted by
    “Official Inflation”

  • whatisgoingon

    There are still two counters that the hypers bring up
    1. Inflation is the expansion of money supply
    2. There is no disinflation in food prices, tuition, medical services, etc


    Inflation will remain low until economic activity picks up. There is a lot of cash in the system that is just sitting there and not changing hand. As soon as the economy picks up, I believe we will see much higher inflation, closer to 5-6%. It will become trickier for the Fed to control it then, because taking on policies that promote economic contraction a few years after the economy picks up will be suicide.

  • whatisgoingon

    Cullen I think the change in real discretionary income would be a better measure then inflation to see if the everyday consumer is better or worse month after month. Does anyone track this?

    CPI is not designed to track if consumers are in a better or worse position but people often interpret it like this.

  • Mr. Market

    Those charts would go through the roof. Because then the USD would sink like a ton of bricks against all other currencies and the price of everything imported (like oil) would go through the roof as well.

    I would like to give the example of oil from mid 2001 up to june 2008. It went up from about $ 20 to over $ 140 in june 2008, a sevenfold increase. But in the same timeframe the EUR/USD went up from about 0.80 to 1.60. As a result oil priced in EURO went up “”only”” by 3.5 times. So, that was the result of thrashing the USD.

  • whatisgoingon

    Do people recall what happened to silver’s price when the CME raised margin on silver last year?

    The margin on future speculators is now being raised.

    So can we conclude that commodities (like oil) follow a similar sell off? If so, headline inflation will drop dramatically which will be supportive to the general economy.

  • bart

    One of the whopper issues with CPI-U being too low:

  • John

    I doubt very many front line bill payers will be buying into these hocus pooches 2% inflation claims. They are the ones who are writing the checks for their hospitalization insurance, real estate taxes, auto insurance, home insurance, college tuition expenses, and of course their grocery bills. Whether it’s cereal, coffee, tuna fish, salad dressing, orange juice, pasta, canned soup, beef, mayonnaise or whatever other item one might place in their shopping cart if the price isn’t rising, the quantity your getting is shrinking. A lot of the people, actually darn near everyone, I talk to who are in the paycheck to paycheck crowd see this first hand. Worst still, maybe both. They see it every month. Ask them about these voodoo 2% inflation numbers the government and some people keep citing and they’ll just laugh.
    Consider this too. When the price of wholesale coffee goes up, retail coffee goes up. If that wholesale price comes back down, which it often does, guess what happens to retail coffee prices? Nothing. So don’t spend too much time looking for that 59 ounce container of orange juice to go back to 64 ounces any time soon. But if the price or oranges goes up because of some Florida freeze or whatever, you OJ might very well drop to 54 ounces next time. Same price of course. Say what you want about gas prices but a gallon is still 128 ounces. They haven’t changed that yet.
    Keep in mind too that these are the real people in the front lines paying the real bills. They see the real prices and they write the real checks. And they aren’t the only ones who see this either. There are one heck of a lot of well known, frequently cited market analysis’s that probably many of you site (no not John Williams) when their opinion conveniently agrees with yours, who would readily put the inflation at significantly more then 2%. I’m on their side as is danm near everyone else who lives in the real world.

  • U308 Chemist

    With all due respect…

    The cost of planting (fertilizer, seed, and pesticides) for soybeans, winter wheat and corn in 2011 vs. 2010 was 6%, 13% and 14% higher, respectively.

    For 2012 vs. 2011, the estimates for soybeans winter wheat and corn are to be in the ranges of 12%, 13% and 16% higher, respectively.

    2010 prices for ammonia, ammonium phosphate and potash were 520$, 503$ and 501$ per ton, respectively.

    2011 prices for ammonia, ammonium phosphate and potash were 736$, 661$ and 526$ per ton, respectively.

    Veterinarian costs for livestock are up 8-11% year over year.

    2011 hay prices were 1.5 to 2x higher than 2010 prices. Cattle and horses need to be fed and watered before the lights are turned out.

    Borrowing from “Here in the Real World,” (Alan Jackson) and “Workin Mans Dollar” (Chris LeDoux), ”this workin’ Mans Dollar only buys the things A workin’ man really needs”. An apple, is something I share with the horse. An iPod or an iPhone doesn’t do squat keepin the wolves from tearing the calves apart.

    Yea, just keep telling those working for a living, there is only 2% inflation here in the real world.

  • JH

    Who is drinking this Kool-Aid?
    Those of us who are paying the bills know that 2% inflation is a lie, and anyone pushing it, has an agenda.
    Stock Brokers, Real Estate agents and the like will always tell you how things are fine and only going to get better because they want to put their hand in your pocket.