Consumer Price Index (CPI) data for August, released last week, made headlines after its 1.9% year-over-year headline increase in prices exceeded expectations of 1.8%. This was significant given that the last five monthly CPI reports fell short of market forecasts. Major drivers included higher gas prices (due largely to refinery shutdowns stemming from Hurricane Harvey) and a 3.3% increase in the cost of housing.
Energy and housing are among the largest components of the CPI basket (which is set by the Bureau of Labor Statistics [BLS]), and therefore have the most impact on the overall headline inflation number. However, inflation’s impact on you depends on what you actually buy each month. With this in mind, we think it can be both instructive and fun to look at the underlying items in the CPI basket to determine which saw the largest price gains and losses, regardless of the BLS’s idea of relative importance:
While gasoline and other types of fuels made up four of the top 10 price gains (even more if individual grades of gasoline are considered), another somewhat surprising trend showed up—breakfast. Bacon and related products saw the largest price increases in the CPI basket, at 12.5% year over year. Frozen noncarbonated juices and drinks were also in the top 10, with a 6.6% year-over-year gain (another area that saw potential hurricane impacts, though this time from Hurricane Irma).
So the bad news is that if your breakfast routine includes bacon and orange juice, you’re probably spending more money than you were a year ago. But, if you’re flexible in your breakfast options, you might consider alternatives that saw prices decline year over year, including: Breakfast sausage (-1.4%), eggs (-3.7%), breakfast cereal (-0.8%), and fresh whole milk (-1.1%).
Bacon and orange juice are very small components of the overall CPI basket, and therefore inflation in these areas doesn’t add much to the overall headline number. However, looking at the individual items in the basket can help explain why the impact of inflation can sometimes be felt more in our individual pocketbooks than the headline number would suggest.