Unlike Next Month, the November CPI Was Dominated by Oil

Alan ReynoldsUSA Today headline says, “Inflation rate surges as CPI data shows prices rose 6.8% in November, the fastest spike since 1982. ”That 6.8% figure does not describe what happened this November at all. It measures what happened at some points in time between the brutal pandemic of 2020 (when U.S. deaths from COVID-19 rose from 908 on November 1  to 2,389 by November 30) and the much safer and stronger global economy of November 2021.To find a  record “spike” in November, we must look at monthly data, not 12‐​month changes. The graph highlights monthly changes in three categories:Energy, which has relative importance (weight) of 7.5% in the CPI, rose by 3.5% in a  single month. And that counts only direct energy costs such as gasoline, fuel oil, natural gas, and electricity. It does not count the indirect effects of higher energy costs on the costs oftransportation (of people or products) by air, ship, trains, trucks, and buses. And it does not count theindirect costs of higher energy costs on energy ‐​intensive products such as grain, cattle and chicken, grain, aluminum, ethanol, paper, and plastics.Transportation, which has a  weight of 16.9% rose by 2.5% in November alone. As argued above, both wholesale and retail transportation costs are heavily affected by rising prices for oil, natural gas, and coal (which move together globally due to substitution), and electricity derived from these fuels. In addition to such obv ious items as airline fare...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs