In reading an article about retirement planning — meant for financial advisors, but freely available on the Web — I came across (relatively high up in the article) a long bit of copy detailing 3 specific reasons why (bolding by EleBlog):
“The CPI (consumer price index) may be dramatically understating real-world cost increases for goods and services.”
Even if you don’t want to read about retirement, you might read the article (you can look at it online or download a PDF, free). In my printed version of the PDF, the meat on inflation is on page 2. It includes this:
When Shambo looked at various analyses, including some conducted by the BLS itself, he found that, on average, the CPI understates actual out-of-pocket cost increases by about one percentage point per year.
A 2% inflation rate, in other words, would actually translate to a 3% increase in out-of-pocket costs for the average consumer.
Shambo’s actual client experience suggests that the CPI understates spending inflation from .25 percentage points to 1.50 percentage points, depending on the individual’s behavior in the early years of retirement.
Source: http://electricalcontractor.com/?p=7077
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