Why Ice Cream Is More Important Than Bacon When Calculating Inflation

April 19, 2017 5:00 am
Why Ice Cream's More Important Than Bacon When Calculating Inflation
Why Ice Cream's More Important Than Bacon When Calculating Inflation


Some people may prefer their bacon in their ice cream (see above), But the U.S. Bureau of Labor Statistics reports the two foods need to be separated to understand the Consumer Price Index (CPI) and what exactly leads to inflation.

To review some Econ 101, the CPI is a way of monthly tracking the price changes of goods and services. That includes items that one might buy in the supermarket like ice cream and bacon. As the bureau notes, “bacon has increased in price almost 32 percent over the past 10 years while ice cream went up 21 percent over the same time period.”

However, doing a year-over-year comparison, bacon is less expensive now than it was last January, whereas the price of ice cream has gone up ever-so-slightly. Notes the bureau, knowledge of these two factors helps us “measure the impact different inflation rates have on total inflation.”

In terms of total spending numbers, all U.S. households spent, on average, $54.04 on ice cream versus $39.07 on bacon for the year. In short, ice cream matters more when tracking inflation, because the more that consumers spent on a single item, the more effect it will have on total inflation.

Need to take a bacon ice cream break just to process all that? Take a course on inflation below.



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