Want to hear something really scary? Inflation, the scourge of the modern economy, may be running much faster than we’re led to believe.
I’ll use consumer spending on Halloween as an example of what I mean.
Total Halloween spending has fallen for the past three years and was projected to fall yet again this season, to $8 billion from $8.8 billion last year, according to recent data from the National Retail Federation (NRF).
No surprise there. With many people still avoiding large gatherings due to the pandemic, and health officials calling trick-or-treating a “high-risk activity,” less is going to be spent on candy, costumes, party decorations and other Halloween-related items.
Indeed, spending on costumes was forecast to plunge a not insignificant $600 million compared to last year, from $3.2 billion to $2.6 billion.
Given this, you might suppose that on a per-person basis, Halloween spending would also be down. And yet that’s not the case, according to the NRF’s survey. Average spending per consumer was expected to increase almost 7 percent, from $86.28 to $92.12.
So what’s going on here?
There may be a number of possible explanations for this phenomenon, but I believe the most convincing is also the simplest: Inflation.
And as I’ve said before, the real inflation may be much higher than the official consumer price index (CPI) issued monthly by the Bureau of Labor Statistics (BLS).
Last month, the BLS reported that consumer prices were up only 1.4 percent in September compared to the same time last year. If we remove volatile food and energy prices, they were up slightly more, at 1.7 percent.
How can this be, when consumers are spending 7 percent more on candy and costumes this year, despite total Halloween spending declining?
The truth is that the CPI has undergone several changes in methodology over the years. At one time, it was a genuine cost of goods index (COGI). Today, however, it’s more of a cost of living index (COLI). So when you see that inflation is up 1.4 percent year-over-year, you can be sure it’s actually higher—potentially much higher.