The Economic Perspective: “Inflation During Covid-19”

Mary:  I’m Mary Walden with economist MW, welcoming you to the economic perspective.  Today’s program looks at inflation during Covid-19.  Mike, the Covid-19 virus has had profound impacts on our economy.  One of those impacts may be on how inflation is measured.  Some researchers argue inflation has been under-measured during the pandemic.   What’s the problem and what impact has it had?

 

Mike:  Summary Answer

  • Inflation is calculated by tracking what consumers buy, then tracking the prices of what they buy, and finally using the relative importance of each item to conclude how much overall prices have changed
  • Problem is the “weights” for what people buy are changed infrequently – current weights are over a year old
  • This lack of frequent adjustment can make the inflation rate inaccurate
  • For example, consumers have been buying more grocery items – where many prices have jumped – but less transportation – where prices have fallen
  • Calculated inflation rate doesn’t account for this
  • Bottom line – actual inflation rate is likely higher than reported rate
  • I’m MW

 

Mary:  And I’m Mary Walden for the Economic Perspective, an NC State Extension program from the Department of Agricultural and Resource Economics.