Overall last year, the EPI increased more slowly than the CPI (1.2 percent vs. 1.5 percent). Although the previous four years had seen EPI increases nearly double CPI increases, 2013 was an exception due to relatively tame increases in the price of gasoline. The Federal Reserve’s stated annual inflation target is 2 percent. By these inflation measures, the data suggest that the Fed has no reason to alter its current plan of tapering.
The latest measures of disposable income and consumer credit increased by 0.2 and 4.7 percent respectively, while the average workweek held steady. The combination of mild inflation and rising home prices means that the average family balance sheet is feeling less pressure. That being said, AIER will continue to monitor underlying inflationary pressures awaiting a trigger. See our latest Inflation Reports.
The Consumer Price Index measures the price level of a wide basket of goods and services including big ticket items such as houses, appliances, and automobiles. In contrast, AIER’s Everyday Price Index (EPI) measures the price of goods and services purchased on a regular basis. Therefore, the EPI reflects the day-to-day strain on consumer budgets and more closely reflects inflation expectations used in decision making.
About the EPI
AIER’s Everyday Price Index (EPI) measures the changing prices of frequently purchased items like food and utilities. We do this by selecting the prices of goods and services from the thousands collected monthly by the Bureau of Labor Statistics in computing its Consumer Price Index. The EPI basket contains only prices of goods and services that Americans typically buy at least once a month, excluding contractually fixed purchases such as mortgages. Our staff economists weight each EPI category in proportion to its share of Americans’ average monthly expenditures. In order to better reflect the out-of-pocket prices that consumers experience on a daily basis, the EPI does not seasonally adjust prices.