Economic question

[Orrex]

Why is it that when they report on monthly economic numbers, they say "excluding food and energy costs, the economy grew by .5 percent last quarter."

Well, no shit. If you cut out food and energy costs from my budget, I'd be making money hand over fist. Hell, let's throw out my student loans, too, and I'll be a gazillionaire before you know it.

Is there a legitimate reason that they omit these economy-stiffling numbers from the reporting, or is it just to make the forecast look less dismal?


PARENTHETICAL NOTE: The President can't control the economy unless he's a Republican and the economy is strong or he's a Democrat and the economy is weak. Then it's entirely the result of the President's actions.

[DemocratSinceBirth]

1. I Believe There Are Two Measures Of Inflation

One that excludes food and energy and one that doesn't...

[DemocratSinceBirth]

2. It Looks Like This

%ÄPt= (Pt - Pt-1)/Pt-1

[Orrex]

4. Hey, that looks like math

Can't you draw me a picture, instead?

Actually, I know that there are two indicators, but I seldom hear the food/energy-inclusive figure listed first (or at all, sometimes).

[lcordero2]

3. yes

it is to make the forecast look less dismal.

[DemocratSinceBirth]

5. xactly

eom

[lcordero2]

6. anything coming out of a government agency is wildly distorted

Unemployment numbers is a very good example of this.

[Inland]

7. I belive you are looking at INFLATION measures

which sometimes exclude food and energy, mostly because they tend to be really volatile.

You end up with the "core inflation rate."

[Orrex]

8. Hey, I think that you're right

I couldn't remember which figures they were, exactly, but I knew that they bug me every time I hear them.

Thanks for the clarification.

[unblock]

9. historically, food and energy prices are more volatile

and therefore, month-to-month changes are not very useful for identifying trends.

the idea is that if you include food and energy prices in the monthly inflation numbers, you might get a sharp increase when there's no real inflation, just because food prices happened to jump up this month. or, you might show no a small number when there really is inflation just because the energy prices happened to drop.

in short, there's a lot of "noise" in the monthly movements of food and energy prices; other things show much more stable trends.


of course, the obvious problem then, is what if all the inflation really is in food and energy prices? well, the hope is simply that if the inflation is real, it will eventually be reflected in other things, which will be caught by the inflation statistics.

[K-W]

10. Food and Energy fluctuate seasonally. EOM