The Consumer Price Index gets a lot of attention each month, but it’s not the only game in town.

When it comes to measuring inflation, investors and policymakers have a full menu of alphabet-soup metrics to choose from—the CPI, the PPI, the PCE, the GDP Index, and a host of others. But the Consumer Price Index (CPI)1 typically grabs most of the headlines—and for good reason. From determining the size of next year’s Social Security checks to influencing the amount of interest that owners of Treasury Inflation-Protected Securities (TIPS)2 will earn, time and time again, the monthly CPI print has moved markets and dictated the course of US monetary policy. But as a classic lagging indicator, the CPI has often been criticized for reflecting trends that are already out of date; critics also say it uses methodologies that may be prone to error or subtle biases (see page 4 for more on this).

For the average consumer or casual investor, the so-called “headline” CPI number— the figure that also includes volatile food and energy prices—may be sufficiently revelatory. The August report, for example, showed that the annualized rate of inflation stood at 8.3%, slightly lower than July’s 8.5%. While the small statistical retreat was largely attributed to moderating energy costs, analysts zeroed in on underlying month-to-month price increases in the cost of food, new cars, housing, and electricity, and natural gas, which suggested to the Federal Reserve (Fed) and other stakeholders that inflation was (and is) still a thing.3

But many economists, investors, and other serious inflation-watchers, who hope to unearth trends that the CPI may overlook, will often train their focus on alternative inflation measures, which can sometimes provide a broader, more nuanced, view of the direction and timeliness of price movements. Let’s look at some of the more prominent alternative inflation measures.

To read the whole article click on the link below!

https://www.hartfordfunds.com/dam/en/docs/pub/whitepapers/WP708.pdf