If you perceived a painful sting each time you opened a wallet in a grocery store or at a gas station last year, it wasn’t just you. The Bureau of Labor Statistics has informed the public that the Consumer Price Index for 2007 is 4.1%, the highest inflation rate since 1990. The increase is due to higher costs of energy (up 17.4%) and food (up 4.9%). Without energy and food, the core inflation rate is 2.4%. [BLS: Consumer Price Index Summary]
Published or updated January 16, 2008. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.
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Luke Landes founded Consumerism Commentary in 2003 and has been building online communities since 1990. Luke, also known as Flexo, has contributed to PC World Magazine, US News, Forbes, and other publications. 
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I heard this on NPR this morning. In the same report, they said salaries today are actually lower than they were in 2000 when adjusted for inflation. Now that’s even more alarming.
I used this to my advantage…by foregoing food and energy, I was able to save 1.7% more than the average American!
Core inflation is a sham. It uses hedonics to keep that number low. A good example of hedonics in use is computers. Let’s say you bought a computer five years ago for $1,000. That computer certainly had less computing power than the $1,000 computer today. The BLS uses the five year old computer in its inflation calculations. Now that five year old computer would only cost a fraction of the initial $1,000 you paid (if you could even find it on the market). So the BLS claims that the cost of computers has dropped. The reality is the cost hasn’t dropped. You still have to go out and buy a computer today for $1,000.
During the Clinton administration, the BLS altered the way it calculated inflation. If they used the same formula as they did in the 70s, 80s, and early 90s, inflation would be more like 7%. Ouch!
Just a heads up for those of you who receive measly “annual raises.” These companies, including my own, screw you out of any sort of actual increase by giving you between 1 and 5% annually.
When raise time comes up, march into your bosses office with a printout of the last year’s CPI report. Let him or her know that, in order for you to make the SAME amount of money you made last year, you’ll need between 2 and 4%. So, if they come back at you with 2.5%, let them know they are, in effect, giving you a -1.5% decrease in pay when adjusting for buying power.