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Proxies

There is a growing disconnect between consumer prices and the proxies we use to measure consumer prices. The main reason we calculate macro data, such as GDP, inflation or unemployment is to measure and compare, how well an economy is doing, with the objective to improve the standard of living. Frequently this proxies are used to vote for political leaders. Usually, proxies are a good indication of the actual standard of living, but sometimes, during periods of extreme measures, the difference between actual measures and proxies grows apart, to the point where the last ones are no longer useful. As you can see in the chart below, consumers are suffering the cumulative change in prices, but economists, including the Fed, are managing the annual rate of inflation. Consumers want prices to come down (deflation), while economists are trying to lower the increase in prices. This difference can influence the presidential election.


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