Gold bugs wander the earth again, after nearly a decade of hibernation. Skeptics might say there’s isn’t enough evidence of rising prices to warrant a neck-breaking gold run, traditionally seen as an inflation hedge. U.S. consumer prices rose 1 percent in July from a year earlier, well below the 2 percent target set by the Federal Reserve.
There is a thought: What happens if the government is not measuring consumer price correctly? Is it possible that Inflation is a lot higher than what we think? The Covid – 19 Pandemic has changed the spending habits of people completely; it is not completely because of social distancing or quarantines. According to a new study from Harvard Business school, it is said that, this sudden change can bring significant bias in the consumer price index.
In Most Countries, The Statistics bureaus update their CPI Expenditure baskets only once a year, often using lagged data. For example, the Bureau of Labour Statistics last December revised its weightings using information gathered a year earlier. For example, in the official calculation, foodstuffs receive a weight of less than 8%, while transport receives around 15%. But according to the recent data collected from Consumers’ credit and debit card transactions, it shows that more appropriate weighting would be around 11% and 6%. As gnarled distribution makes food more expensive and grocery stores eat up a greater share of our everyday budgets, the inflation we experience is a little higher than the figures say. As a result, the Indexes didn’t reflect the Covid – 19 Pandemic.
In China, the bias is more difficult to calculate since the weighting of the CPI is a state secret. Nevertheless, the downward bias in China is probably even more pronounced. Last month, food prices increased by 13.2 percent against a 4.6 percent rise in the U.S., because a major flood disrupted the supply chain. Thus, inflation is ticking up, nominal rates are dropping everywhere and who knows what the real interest rates are in various nations.
The General Cost of living in Shanghai is increasing day by day, especially the food is getting expensive and most of the people there spend money only on food and buys nothing else. Surely, Inflation is not something that is just shown in the news headlines, it is something more than that which only the consumers know and experience.
