Why Truflation’s CPI number is lower than the BLS

Ever since we launched Truflation’s flagship CPI index in 2021, there have been major discrepancies between the Truflation inflation number and the numbers reported by the Bureau of Labor Statistics (BLS). While at the beginning, data showed that inflation in the US was, in fact, much higher than what the BLS was reporting. In recent months, our inflation figures have trended downwards at a faster pace than those reported by the BLS. 

The reasons for these discrepancies lie in the methodology that we used to calculate the Truflation US inflation index, as well as the number of data points that we track compared to the BLS. Notably, Truflation tracks more than 14 million data points for its real-time US inflation index, while the BLS relies on just 80,000 data points reported six months after collection. Truflation’s ability to rely on a wide variety of independent data sources means that we can report the real situation on the ground in real-time, while the BLS tends to report its data with a lag. 

In addition to this, Truflation’s categories and weightings are different from those employed by the BLS. Truflation divides its US CPI index into 12 categories, including food and non-alcoholic beverages, clothing and footwear, housing, and utilities. 

Notably, there has always been a large discrepancy between our housing data and the shelter category reported by the BLS. In March last year, we put together a comprehensive paper explaining this difference and the reasons why our data better reflects the real situation in the housing market on the ground. this detailed article can be accessed by clicking the link below.

BLS Housing Data Discrepancies & Adjusting Our Model: Truflation US Post BLS January Prediction Analysis

The main reason for the discrepancy is the fact that the BLS uses a measurement called the Owner's Equivalent Rent (OER). To calculate the shelter category, this assumes that homeowners will be paying an equivalent amount in mortgages as a renter would pay for the same property, adjusted for size and location. However, this doesn't reflect the real costs for renters and house owners, which can differ greatly. In addition, the BLS also includes any government subsidies paid to landlords in the total cost of the rent, which could skew the date to the upside.

And in fact, this is something that we have already seen in the BLS shelter category data. Over the past 45 months, this index has been steadily rising. At the same time, Truflation’s housing category has seen downward movement, although there has been some resurgence in owned property prices in recent months. This shelter category makes up more than a third of the BLS CPI index, which means that any discrepancies or lags in the number have a significant impact on the overall inflation number. Meanwhile, the housing category only makes up around 23% of the Truflation US CPI index. 

Learn more about Truflation’s Methodology

On top of the continued misalignment on the housing/shelter category, we also saw a discrepancy in the food index in January's data. The BLS reported a marked increase in food prices for January, while Truflation’s data shows that food prices decreased in the first month of 2024. This discrepancy could be attributed to the fact that the BLS doesn't account for seasonal promotions and discounts at supermarkets, which have an important effect on the overall consumer expenditure in January. 

Again, we have written a detailed explanation of the surprising discrepancy in the January numbers reported by the BLS and our own prediction – see below.

However, although there are serious discrepancies between the BLS’s and Truflation’s IS CPI indexes, this does not mean that Truflation intends to replace the BLS. Rather, we see ourselves as a complimentary index that can provide a more up-to-date real-time view of the situation on the ground in the US economy and the costs experienced by consumers. 

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To learn more about Truflation's differences to the BLS please read
What’s Wrong with the BLS Inflation Data?