Ice Cream v. Bacon


How much did you spend on ice cream last year? According to the Bureau of Labor Statistics, the average U.S. household spent around $54. But why does BLS need to know that?

Let’s take a deep dive into that ice cream. That’s just one of thousands of data we collect to calculate the Consumer Price Index, a monthly assessment of price changes for goods and services in the United States. The CPI has separate inflation indexes for just about everything people purchase.  For example, the CPI has an index for “Bacon and related products,” and lots of other itemized food categories, including “Ice cream and related products.” 

(Curious about what else we measure? Here’s the CPI’s online table generator tool. You can drill down to the most detailed CPI categories in step 2. Note: You’ll need to enable Java to see the chart.)

Why so many indexes? The CPI needs to carefully track how the prices of food, and just about everything else, change because not every item’s price goes up or down at the same rate. For example, bacon has increased in price almost 32 percent over the past 10 years while ice cream went up 21 percent over the same time period. 

Looking at how prices have moved over the last year, bacon is slightly less expensive than it was in January 2016, while the price of ice cream has gone up slightly. This information is helpful for families looking to see where their food budget money went, as well as researchers investigating changing food prices and other indicators of inflation.

Most importantly, the CPI needs to know how much the average U.S. household spends on both of those two food items in order to measure the impact different inflation rates have on total inflation.  If everybody spent the same number of dollars on ice cream as they do on bacon, then you could just use a simple average of the two inflation rates to get a total. Here is where BLS’s Consumer Expenditure Survey comes in. It measures, in great detail, all the different goods and services consumers purchase in a year, and passes these numbers to the CPI to form a “market basket” – that is, a list of everything people buy and what percentage of their total spending goes to each item.

The latest spending numbers showed that the average dollar amount per year that all U.S. households spent on ice cream was $54.04, while the average amount on bacon was $39.07. That means that ice cream has a greater importance than bacon when tracking inflation, not only in the Henderson household, but in the CPI. In other words, the more people spend on an item, the more inflationary changes to its cost will affect the total inflation rate.

Policymakers, researchers, journalists, government bodies and others use the CPI to make important decisions that directly affect American citizens. Census Bureau analysts use CPI data to adjust the official poverty thresholds for inflation, and it’s one of several factors the Federal Reserve Board considers when deciding whether to raise or lower interest rates. Employers may use it to determine whether to give cost-of-living increases, and policymakers use the CPI when considering changes to allotments for things like Social Security, military benefits or school lunch programs.

I hope this deep dive into ice cream spending helps you understand why the Consumer Expenditure Survey is so detailed.

When not relaxing with a bowl of ice cream, Steve Henderson is a supervisor in the Bureau of Labor Statistics.  He’s spent half of his government career working on the Consumer Price Index and half on the Consumer Expenditure Survey. 


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Comments

From the title, I thought the post would be a comparison about which contributed more to obesity, diabetes and heart disease, and how to lower the thresholds of dietary damage to our health, not to make contracting illness more affordable. I guess that's the new Dept of Labor.

Perhaps you didn't realize that the article was coming from the DOL instead of the NIH. Don't you agree that people (whether doing so is healthy or not) like both bacon and ice cream, so the title likely would draw our attention to an article about how and why a government department functions?

this is very interesting.

This was informative and interesting. Todd Jailer, you've really got to relax man. Your life is passing you by.

The online table generator tool is offline the same day the article is released?

The average dollar amounts are lower than what I thought.

Steve,
This is a great article. You took were able to take a complex topic and summarize and simplify it. It clearly demonstrates the impact of how the fluctuation of the cost of individual consumer items has a big impact on the consumer. Looking at overall trends is a good thing, but, in the end, the devil is in the details.

Wonderful! Very informative !

Just one comment: bacon may not be as "important" because the price increase has made it less desirable financially for many households. Is this given any consideration when determining the CPI? For example, my family eats less beef because chicken is much less expensive, not because it is less important to us.

That is the function of the Consumer Expenditure Survey, experience the author also has. CEX is used to determine what types of products people actually buy. That then informs what is priced in the CPI survey.

Mr. Jailer. The DOL is not a health agency. They don't have employees that could comment on such things because it is not the role they play in our government. An article coming from the Department of Labor giving us statistics of the health impacts of junk foods would just be silly. The DOL focuses on wages, benefits and the cost of living for every-day Americans. That is their role in the government. If you require health data please simply go to another government agency website that focuses on such things. The article is interesting, informative and fulfills part of the DOL's Congressional mandate to the American people. Thank you DOL for not giving us health information in your important articles and newsletters.

nice article

Hello,

I landed on this page after reading the following article from a school discussion post:
https://blogs.wsj.com/economics/2017/04/17/why-ice-cream-is-more-importa...

We are currently reviewing visual analytical graphics in my class. I like your graph and it adds value to the article. Good job!

Hugo

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