Tuesday , 6 December 2016


The Chapwood Index Shows Price Inflation to be 40% Higher Than Indicated by the CPI!

The Chapwood Index reports the unadjusted actual cost and price fluctuation of the top 500 items on which Americans spend their after-tax dollars in the 50 largest cities in the nation and it shows price inflation to be much higher (by 40%!) than that indicated by the Consumer Price Index over the past 4 years! No wonder the poor in America are suffering (with their wages and benefit increases have been aligned to the CPI) and there is a general decline in business on Main Street in the USA.

The above excerpt (edited), and what follows, is taken from an article by Alasdair Macleod entitled Inaccurate statistics and the threat to bonds which can be read in its entirety HERE.

There are two possible approaches to assessing the true rate of price inflation:

  1. you can reverse all the tweaks government statisticians have implemented over the decades to reduce the apparent rate (as does John Williams of Shadowstats.com), or
  2. you can collect a statistically significant sample of price data independently and turn that into an index and the Chapwood Index does just that and deserves wider publicity.

This is from the Chapwood Index website: “The Chapwood Index reflects the true cost-of-living increase in America. Updated and released twice a year, it reports the unadjusted actual cost and price fluctuation of the top 500 items on which Americans spend their after-tax dollars in the 50 largest cities in the nation.”

The Index is statistically significant, and it consistently shows price inflation to be much higher than that indicated by the Consumer Price Index (CPI). The table below shows this difference since 2011, and how it affects real GDP.

Chapwood index

Sources: Chapwood Index, US Bureau of Labor Statistics and Bureau of Economic Analysis. Figures may not total due to rounding.

The Chapwood number in the table is the simple arithmetic average of the 50 cities. The year-in, year-out 10% inflation rate is notable. Furthermore, Chapwood shows cumulative inflation rate as shown by the CPI for the four years to be understated by 39.9%, and using Chapwood numbers in place of the GDP deflator, real GDP has slumped a cumulative total of 21.4% over the four years.

No wonder the poor in America are suffering: when their wages and benefit increases have been aligned to the CPI, they have fallen nearly 40% in real terms over the last four years. The resulting decline in business on Main Street revealed by these figures explains why Wal-Mart are laying people off and closing stores, and why trade associations continually issue disappointing trading assessments.

Understated price inflation fundamentally distorts everything that is macroeconomic, from monetary policy to economic commentary.

  • It misleads central bankers into thinking they are missing their inflation targets when they are in fact exceeding them by a dangerously wide margin.
  • It misleads analysts into thinking we are on the brink of a deflationary slump with prices maybe about to collapse and, most worryingly of all,
  • It causes bond markets to become more mispriced than even hardened bears realize, something that’s very likely to be corrected through a financial shock.

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Related Articles from the munKNEE Vault:

1. Debunking the Validity of ShadowStats’ Inflation Numbers

Shadowstats presents what they claim to be the original methodology used by the government to calculate the rate of inflation in the U.S. but Shadowstats’ John Williams is not calculating inflation any differently. He is not using the 1980s or 1990s methodology… [Instead,] all he’s is doing is taking the CPI data and adding on an arbitrary constant to make it look like inflation is higher! Read More »

2. Official and ShadowStats Monthly Inflation Rates: 1872 to Present

[There is a considerable difference between the official BLS inflation rate (1.63%) and the ShadowStats’ alternative method of calculating consumer prices (9.07%) but] I believe that the optimum method is probably somewhere between the two. [Let me explain.] Words: 390

3. Real-time Inflation Data is Now Available – Finally

Inflation is a significant measurement for the economic health of countries around the world but rates are often reported weeks after data is collected. To address this problem, two professors at MIT Sloan School of Management have launched the Billion Prices Project which is the first website to publish daily price indexes and provide real-time inflation estimates around the world. Words: 825

4. Inflation: What Do the Non-CPI Inflation Gauges Say It Is?

Whenever the BLS posts their monthly CPI there’s always the same response from critics that the index is flawed. That’s fine. I think a healthy dose of skepticism regarding government data is perfectly good. So let’s take a look at some independent gauges to see where prices are. Read More »

5. The Big Mac Index Reveals the REAL Facts On U.S. Inflation!

A look at the trend in prices of the Big Mac clearly shows that investors are being penalized with higher inflation, lower income from bonds and certificates of deposit and being led to believe that the economy is growing better than it really is. [Let me explain.] Words: 1012; Charts: 2 Read More »