Have prices only risen by 3% this year?

Looking at annual inflation, the official figure shows a 3% price increase compared to last November. Does this really not surprise anyone? In reality, bills continue to climb. Eggs have gone up 22%, coffee almost 20%, bananas 35%, and housing 13%. With such obvious increases in basic goods and services, how can we explain that overall inflation is only 3%?

When calculating the Consumer Price Index (CPI), it starts with a set of goods and services considered essential for families: food and beverages, clothing and footwear, healthcare, transportation, communications, energy, and housing. Therefore, it's common to feel that the CPI fluctuates due to the impact of certain specific products. In the calculation, the CPI is a weighted average. This means that even if a product's price rises significantly, if it has a small weight in the sample, the effect on overall inflation is limited. For example, if eggs rise by 50%, but only represent 2% of the total, the overall impact is small.

The perception that prices are rising faster than the CPI is due to the fact that our personal sample It doesn't match the standard sample used in official statistics. Furthermore, when some products skyrocket in price and people reduce their consumption, they can lose weight or even disappear from the statistics. The result is that the real inflation experienced by each family can differ significantly from the published inflation rate. The index is created, the deception is created.

And ultimately, the great paradox is that the CPI ends up serving more to reassure headlines than to describe the reality people experience. When the methodology allows for the dilution of very sharp increases through an average that smooths everything out, the risk is that official data will end up justifying policies or rhetoric that are increasingly detached from what is happening in people's homes.