INDIANAPOLIS – The March Consumer Price Index (CPI) convinced many an economic cosmic cataclysm is about to occur. Yes, an 8.5% increase over the same period last year is startling. That’s why inflation led off the evening news and dominated newspaper headlines. 

Yet, when the U.S. Bureau of Labor Statistics (BLS) announced its March CPI figure, it also reported the March 2022 CPI figure exceeded the February 2022 number by 1.3%.

This 1.3%, this short-term number, was the one often headlined in the past. If prices sustained that monthly growth rate, they would be 16.8% higher by the end of 12 months.

Clearly, a 16.8% prospective inflation rate is scarier than an 8.5 retrospective rate. Both rates are technically correct, but many CPI components are highly variable, and the purpose of the Index is to tell us where we have been, not to forecast the future.

Forecasting the CPI is perilous. Consumers and suppliers change behaviors in response to non-economic factors like Ukraine. Often these are short-term changes. Offsetting these transitory variations are the less volatile weights assigned to each of  the 300 or so items in the CPI. They are based on the Census Bureau’s Consumer Expenditures Survey.

Thus, the CPI has two distinct elements, the prices we face and our expenditures, which become weights applied to those price changes. If the price of pizza goes up, most of us will try to offset that increase by ordering a medium pepperoni instead of that large meat lovers’ delight.

These weights reflect well-established patterns. Between 2010 and pre-Covid 2019, the item with the greatest change was medical care which rose from a weight of 6.6% to 8.8% of consumer spending. In sum, during this period, 37% of items in the CPI gained importance while the remaining 63% decline in relative importance.

Issuing the CPI each month is a massive task requiring the collection of price data at a very detailed level.

In May 2021, a pound of sliced bacon for breakfast was $6.35, up 18.7% from a year earlier. Eggs were selling at 1.62/dozen down 2¢ (-0.9%) from a year ago. Coffee was 2.2% more expensive per pound. The electricity used prepare breakfast cost 14¢ per kwh, up 4.5%

Not all prices had such moderate changes. What we heard about was the gasoline for your car cost you 58.2% more in 2021 than in 2020, before Ukraine became our concern. Now we have data showing the gasoline increase for March ’21 to March ’22 was 70.1%. That’s called runaway inflation, but remember, it applies to only one, albeit important, item.

You can blame whomever you will for inflation, but you better be looking in the mirror when you do. Prices and purchases are interdependent. You can’t just shift full responsibility for inflation casually to people you don’t like. 

Mr. Marcus is an economist. Reach him at Follow him and John Guy on “Who Gets What?” wherever podcasts are available or at