Transcripts

"Home Ec"-The Government's Inflation Claim Doesn't Add Up

SUSIE GHARIB: As business journalists, we cover the big picture of economics. But there`s a more personal side to the topic, your economics. So tonight we begin a monthly segment called home ec, bringing the economy and investment close to home, quite literally. We`d like to introduce you to our home economist, Brett Graff, a trained economist and stay-at-home married mother of two. Tonight, Brett takes on the government and its take on inflation. The CPI shows prices are up 0.2 percent while wages are up more than 2 percent, so we should be ahead. But are we really?

BRETT GRAFF, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Bureau of Labor Statistics basket of goods looks at 372 items, everything from food to major appliances, cars and more. Look, economists are smart, but my guess is they don`t spend nearly as much time as I do wondering around the supermarket shopping for my family of four. So if you think your life has gotten fairly expensive, I`ve got some numbers to prove you right. Let`s create our own basket of goods from the government`s list, things most of us buy every week and some weeks several times. Yes, going up and down the aisles is the research for this analysis and conclusion. The price of milk is up, hmmm, over 10 percent. So I called the Bureau of Labor Statistics to ask why. They told me cows were being slaughtered because their feed was too expensive. It seems everything made of milk is more expensive. Butter is up 31.4 percent. Margarine and cheese are higher too. Yes, they can`t believe it`s not butter. I can`t believe it`s not cheaper. But eggs are less expensive. Next, the meat counter. According to the government, the price of steaks has gone up 14 percent since September 2003. And if you`re thinking about switching to chicken, that`s up and so is pork. And if you don`t eat meat, fresh seafood, yep, it`s up too. There is some better news in the fresh produce section. A five pound bag of white potatoes has dropped and so have apples, though bananas are pricier. Well, it`s not like it matters what they charge. You have to buy it anyway (INAUDIBLE). Your morning cup of coffee and bowl of cereal are more expensive and so are bread and carbonated drinks. And if you`re one of those shoppers who drives around looking for specials, think again, because unleaded gas is almost 10 percent higher from the same time last year. Time to do the checkout math. We`re now spending almost 11 percent more on these items than we did a year ago. And remember, paychecks have risen an average of 2.3 percent for the same period. So why is the government`s price index seemingly so much rosier? It`s the items we don`t buy every week or even every year. Televisions are down, camera equipment, major appliances and cars are cheaper too. And so are computers, down 8 percent with a near guarantee, in my experience, the price I paid will fall even further as soon as I bought mine. So the moral of the CPI number story from this home economist. If you`re not into buying too many groceries each week or filling up your car and you`re much more interested in those big ticket items, well, you`re actually ahead of the game. Brett Graff, NIGHTLY BUSINESS REPORT, Miami.

GHARIB: That`s when they talk about the core rates, excluding food and energy.

KANGAS: Who needs that?

GHARIB: Who needs to put gas in their car?

KANGAS: Hey, potatoes were down.