Food and Energy Are 33% of CPI, Time To Stop Excluding Them

If the U.S. economy shows negative growth for two quarters, it’s widely considered to be in recession. With the housing market taking a toll on consumers, who account for two-thirds of economic growth, there is plenty of cause for concern about recession. At the same time, the economy can’t grow too quickly either, or prices of goods and services increase faster than incomes and inflation sets in.

Popular consumer inflation measures like Personal Consumption Expenditures and the Consumer Price Index often exclude food and energy prices because, historically, these items are volatile and cause irregular readings. But in recent years, food and energy prices have risen consistently, so it seems irregular to exclude them. Today the New York Times published an interactive inflation chart which details how the Bureau of Labor Statistics measures CPI. Food/Beverages and Transportation together account for 33% of CPI. When CPI is released every month, markets tend to focus on the “Core” number which excludes food and energy. With these items accounting for such a high percentage of consumer spending, the question is why.