Christmas Cookie Inflation Index, 2023 Update

By U Cast Studios
December 19, 2023

Christmas Cookie Inflation Index, 2023 Update
Image Courtesy Of Strong Towns

We are entering an election year—a dreaded presidential election year—and so I’m sensitive to the idea that things in our culture are about to get crazy. I’m also sensitive to the notion that any discussion about inflation will be interpreted by many as either an attack or an affirmation of one or another political persuasion or politician. I’m so bored with all of that, but I’m still going to issue the disclaimer I’ve used when writing this annual column.

This article was written by Charles Marohn and originally published by Strong Towns.

Nothing I write here should be construed to be for or against any national political party or politician. I do not personally believe, nor am I trying to suggest, that the policies of a specific politician or political party has caused or alleviated inflation. If anything, my comments and analysis should be read in the context of a tension between top-down and bottom-up systems, not a conflict between left- or right-of-center ideologies.

With that bit of sad nonsense out of the way, I’ll also share a bit of feedback I received from one of my close friends. He said that he loves the Christmas Cookie Inflation Index but that it is “a silly way to measure inflation.” I agree and disagree, but either way, let’s use this moment to kick off a bit of frivolity. ‘Tis the season!

The backstory is simple (and you should read the updates from 2021 and 2022 if you want an expanded version): I have long believed that Americans are being gaslit when it comes to inflation, that official statistics understate the inflation we all experience. I believed this long before the current bout of official inflation. I started the Christmas Cookie Inflation Index (CCII) in 2019 to provide a data point that checked my intuition.

Each year, I spend much of December baking Christmas cookies. I follow recipes handed down from my dear grandmothers. The traditions are very specific in terms of the ingredients used, down to the specific brand. And so, every December, I find myself purchasing the same items, in the same quantity, of the same brands, from the same store. The act of documenting the prices of 10 items was a natural extension of that tradition.

The CCII is silliness in that it doesn’t represent—or even pretend to represent—inflation as it is experienced broadly. The official Consumer Price Index (CPI) goes far beyond sugar, spice, and everything nice. The CCII doesn’t cross into ridiculousness because, unlike CPI, it is not subject to any technical manipulation. The 10-pound bag of sugar I purchased this year is the same size, quantity, and quality that my grandmothers purchased decades ago.

As I’ve said in the past, I’m not arguing that my inflation index is a better representation of reality than the official numbers, but I am arguing that the more my index diverges from those official numbers, the more we should feel licensed to question the official measurements of inflation.

There are good reasons to believe that our institutions understate inflation, even in good faith. There are a lot of judgment calls in the official numbers. Like nearly all economics, it is an art pretending to be a science, a religion pretending to be rational, secular undertaking. I don’t believe in nefarious motivations here; I think our institutions are gaslighting themselves along with us. There is a lot at stake and that does motivate our reasoning.

This year’s figures are surprising, even to me. While the official inflation rate is just 3.2%, the CCII rose 12.0% over the past year. That is essentially flat from last year when the CCII was up 12.2%. Officially, inflation may be on the decline (meaning prices are still rising, but at a slower pace), but the reality is that my Christmas baking is significantly more expensive than it was last year.

Worth noting is the fact that the official inflation statistics include a line item for food. While food includes things beyond my baking ingredients, we might expect food as a category to more closely relate to the basket of goods I’ve chosen than, say, the broader index. That’s not the case.

Food is up 3.3% year over year compared to the CCII—essentially a sub-index of food—which is up 12.0%. Either we need to believe that food prices have broadly declined while cookie ingredients have increased, or something else is going on.

My basket of cookie-baking ingredients in 2019 cost $49.94. If those ingredients rose by just the official inflation rate, they would cost $59.52, a hefty increase. Instead, that same basket of ingredients costs $71.18.

I get these same baking ingredients from the same shelves, in the same store, in the same neighborhood that I have for decades. Official statisticians can substitute and adjust all they want, but this is my reality. This is your reality.

This is reality.

The Target corporation is one of those Minnesota companies I tend to follow. They have struggled with responding to inflation and got stuck with a glut of merchandise last year (in retail, it’s generally better to have too little merchandise than too much). They seem to have fixed that problem this year. Last month, their CEO noted that it has been almost two years of continual pullback by shoppers. The trend has shoppers now cutting back on essentials as well, stuff like food and toiletries.

Target’s revenue is up—they are doing more sales—but they are selling fewer items. That’s what happens in an inflationary environment where things simply cost more.

Of course, the past year of inflation gave us moments of true ridiculousness, like this post by Paul Krugman:

Say what you want about Elon Musk’s vision for the Twitter platform (and I’ve said a few things), but I do like the ability of readers to add context that is shown along with silly posts like this.

If you read that Krugman post and then context and still don’t get the ridiculousness, then here’s some satire by former Strong Towns podcast guest Chris Martenson to clarify:

Those of you who have been here a while know that I find Krugman to be silly, a fitting avatar of macroeconomics as currently practiced in the United States. Like all tragic comedies, he is hyper ironic (unintentionally), taking himself very seriously while saving his critical thinking for the others. I’ve made this series of inflation-related Krugman tweets into one long statement for ease of reading. I share this because, in some ways, he could be talking about me in the first paragraph. (Emphasis in the second paragraph is mine.)

In the early 2010s, we had inflation truthers, who insisted that official numbers were hugely understating price increases. Right now, I’m being bombarded by disinflation deniers, who refuse to believe that inflation is coming down. Many of these deniers pose as regular people just seeing what’s in front of them, with many (wrong) assertions that people like me are elites who never do their own shopping.

But there are a number of “tells” that much of this is political, a refusal to admit that anything might be going right under Biden. For example: self-proclaimed regular people complaining about how much stuff costs at Whole Foods. Or, people who are still going on about the soaring prices of eggs, which have in fact come way down this year. I’d say that such people don’t actually buy groceries, but more likely they’re basically engaged in tribalism pretending to be observation.

“Tribalism pretending to be observation,” also known as 21st-century macroeconomics. Oh, Krugman, thou dost protest too much.

As always, I welcome your love, hate, nuance, pushback, affirmation, and critique on this. Is the CCII a “silly” exercise? Perhaps. Does it represent inflation as broadly experienced by Americans? No, but does any measurement really do that? Of course not. Let’s stop pretending that it does.

The Christmas Cookie Inflation Index measures my reality as I do my annual baking. We might be told that inflation is up only 3.2% (3.3% for food), but in my reality I’m paying 12% more for baking ingredients than I paid last year. I’ve got the Christmas music going, cheer in my heart, and promise not to let reality dampen my spirits or generosity. I hope it doesn’t dampen yours.

Wishing everyone Merry Christmas followed by a year of peace, goodwill, and many blessings. See you in 2024.

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