2014 Inflation Remained Low, But Not for Food

Thursday, January 29, 2015 | Leave a comment

One of the indicators I watch closely is the monthly change in the Consumer Price Index (CPI), or more commonly known as inflation.  Unfavorable inflation rates can have a large impact on all of us, but particularly on retirees living on fixed incomes.

The Bureau of Labor Statistics recently released that inflation increased at a modest 0.8% in 2014.  For many, this has been great news, as many retirees’ purchasing power remained strong.  Part of the reason for this low inflation report is due to the much publicized low price of oil–the latest price I paid for gasoline was $1.99/gallon.  For all you travelers, this may be a motivator to rent an RV and travel America!

On the other hand, not all the information in the CPI report was good.  While the price of oil has been falling, the price of food has been climbing.  Below is a chart that shows the 2014 change in food prices:

The CPI attempts to accurately measure the change in purchasing power for the goods and services consumed by urban consumers and urban wage earners.  But, if you are an atypical spender and travel less frequently, it is likely your individual inflation is much higher than the .8% composite number reported.  Heavy meat eaters, especially, have felt the pinch.

Below is another interesting chart showing total inflation in the eight major sub-categories of the CPI since 2000:

Source: Bureau of Labor Statistics

A couple noticeable observations are Medical Care having increased over 72% and Food & Beverage having increased just over 48% since 2000.

Often the older we become, the greater percentage of our budget is spent on the higher inflation Medical Care and Food & Beverage categories and less on the historically lower inflation Apparel and Recreation categories.

So, let’s all try to travel a bit more and eat less meat!

Thanks for reading,

Nick