The Hot Dog Economy
We’re not sure about you, but we’re probably not alone in attempting to make sense of the economy. And like many of you, we got a good chuckle from the White House’s tweet that “the cost of a 4th of July Cookout in 2021 is down $.16 from Last Year.”
The Whitehouse’s tweet included an appetizing photo featuring baked beans, chips, cheese, vanilla ice cream, ground beef, chicken and more. And it cited data from a handpicked source suggesting that the price of cheese and chips declined by 1 percent year-over-year. Ice cream dropped even more, according to the Tweet, with prices sliding 5% in the same time period. And the showstopper? Ground beef — with prices down 8% YOY.
All of this sounds great. But it’s simply not true, at least in terms of the actual pocketbook impact. Why? Because a single trip to the store in your old jalopy would have eaten up more than the cost of the entire cookout in gas price increases (and add another 25% or so to the order if you decided to Instacart it). Specifically, the price of gas increased nearly 50% from $2.174 a gallon during the same period in 2020 to $3.147. And that’s just the tip
of the (melting) ice cream berg—with the price of electricity and such to keep everything frozen up 4-6% (consumer vs. industrial usage) year-over-year according to the US Energy Administration.
What’s really happening with consumer inflation, despite the Whitehouse’s obvious attempt at a whitewash? For this, let’s turn to the Wall Street Journal, which recently noted that, “The U.S. economy’s rebound from the pandemic is driving the biggest surge in inflation in nearly 13 years, with consumer prices rising in May by 5% from a year ago.”
Further, the WSJ notes, “The Labor Department said last month’s increase in the consumerprice index was the largest since August 2008, when the reading rose 5.4%. The core-price index, which excludes the often-volatile categories of food and energy, jumped 3.8% in May from the year before—the largest increase for that reading since June 1992. Consumers are seeing higher prices for many of their purchases, particularly big-ticket items such as vehicles. Prices for used cars and trucks leapt 7.3% from the previous month, driving one-third of the rise in the overall index. The indexes for furniture, airline fares and apparel also rose sharply in May.”
Let us repeat: those are monthly increases in the price of used cars, not year-over-year. And that assumes you can find a vehicle. It’s a black swan to find a low mileage F-150 on the lot of a car dealer, let alone one for less than its original MSRP. Trust us, we’ve tried, and we’re in the market, so if you have better luck than us, let us know.
But back to cookouts. The economic question is how does the Whitehouse claim a price decrease when we’re actually seeing rampant consumer inflation in recent months?
To answer the first, we need to go back to our college statistics classes which taught us you can always cherry pick data to support the argument you want to make. For example, you might opt to not include total landed cost for goods (e.g., including transportation), or you might pick wholesale vs. consumer pricing. Another option is to pick specific regional data (e.g. Midwest vs. West Coast). Or you might include the economic benefits of added Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) programs.
In short: you can always find numbers that will tell the story you want to say. But it’s a sad obfuscation on the actual consumer prices we’re all paying that the Whitehouse is telling us things are cheaper when they’ve gone so far in the other direction. Call it what you may, but we call this the hot dog economy. And as with all encased meats, however good they taste, don’t ask what’s inside.