U.S. Cost of Living Is Higher Than Official Inflation Rate Shows

If the costs of living these days seems to be rising faster than the official 1.3% inflation rate, there’s a reason.

The annual inflation rate for Covid-connected purchases is 1.85%, or a half percentage point higher than the Consumer Price Index, according according to Harvard Business School professor Alberto Cavallo.

Prices of such goods as groceries and paper towels that have been flying off the shelves during the pandemic are experiencing higher inflation compared with the costs of some less-popular purchases such as gasoline, he said.

U.S. Cost of Living Is Higher Than Official Inflation Rate Shows

Distortions from the official CPI report can be seen in used-car pricing, which showed their biggest monthly jump in August since 1969, but are still far short of the increases seen by used-car auctioneer, Manheim, an Atlanta-based firm that sells roughly 7 million vehicles a year.

U.S. Cost of Living Is Higher Than Official Inflation Rate Shows

“The jump in used car and truck prices over the past two months might reflect the increased demand from city-dwellers who no longer are comfortable taking mass transit and others who have left the city and now need a vehicle,” said Kathy Bostjancic, economist at Oxford economics.

©2020 Bloomberg L.P.

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