It is not often that a mundane financial market concept like inflation crosses paths with a very real part of our everyday lives. Inflation is often thought of as a bogeyman that erodes our financial well-being and causes us to work harder to make sure we “keep up.” Price increases are averaged into one of several widely followed inflation indexes and reported throughout financial markets and the popular media so we know the inflation rate, which affects our cost of living and influences investment decision making.
Inflation gets more interesting if we apply it to upcoming purchases and how it may impact gift giving for Valentine’s Day, the fourth busiest shopping holiday behind Christmas, back to school, and — only marginally — Mother’s Day. When measuring cost increases over time, the rate of inflation, most investors think of the Consumer Price Index (CPI). The CPI is a broad measure of price changes on over 200 items (yes, more than 200), organized into eight broad categories that include apparel, housing, recreation, and transportation. If there is an item for sale to consumers, the cost is likely tracked by the CPI.
Digging into the CPI may help answer the question of what to buy a significant other for Valentine’s Day. By taking a look at several Valentine’s Day–themed items measured by the Bureau of Labor Statistics (BLS) in the CPI calculation, we may be able to add some insight on gift giving for this upcoming holiday.