The Bureau of Labor Statistics is considering changing the way the core consumer price index (CPI) rate is calculated according to a Wall Street Journal report. They wouldn’t change the formula, just the precision to which inflation is measured.
For example, a if the index for one month is 198.945, and it moves up to 199.355, the actual change is 0.206 percent, which rounds down to 0.2 percent. But when the BLS rounds the initial month’s index down to 198.9, and the index for the next month up to 199.4, that produces a 0.3 percent rise.
This is a good example of one way numbers can be manipulated — intentionally or not — to come up with different values to suit the presenter’s agenda.
Published or updated August 14, 2006. 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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I usually round everything to the nearest thousand, so that means the CPI is zero. Yay, everything is free!
The important thing is that BLS changes the facts into fiction and this affects the economy as a whole. Why are they doing it, anyway?
By increasing the precision of the underlying data (three decimal places rather than one), the final calculation will be more “accurate,” as the example I quoted shows. More accurate trend calculations will supposedly line up better with analysts’ predictions, which means the stock market may not react as strongly to CPI announcements.